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Is StoneCo (STNE) Stock Undervalued Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is StoneCo (STNE). STNE is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

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Investors should also recognize that STNE has a P/B ratio of 1.63. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 3.05. Over the past 12 months, STNE's P/B has been as high as 2.01 and as low as 1.04, with a median of 1.58.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. STNE has a P/S ratio of 1.98. This compares to its industry's average P/S of 3.17.

Finally, investors will want to recognize that STNE has a P/CF ratio of 9.76. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 10.69. Over the past 52 weeks, STNE's P/CF has been as high as 28.81 and as low as 8.12, with a median of 11.95.

These figures are just a handful of the metrics value investors tend to look at, but they help show that StoneCo is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, STNE feels like a great value stock at the moment.

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Zacks Investment Research