Should Value Investors Buy Office Depot (ODP) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Office Depot (ODP). ODP is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 5.63 right now. For comparison, its industry sports an average P/E of 13.89. Over the past year, ODP's Forward P/E has been as high as 7.12 and as low as 3.19, with a median of 5.23.

We also note that ODP holds a PEG ratio of 0.82. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ODP's PEG compares to its industry's average PEG of 1.35. ODP's PEG has been as high as 0.94 and as low as 0.27, with a median of 0.46, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ODP has a P/S ratio of 0.12. This compares to its industry's average P/S of 0.34.

These are just a handful of the figures considered in Office Depot's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ODP is an impressive value stock right now.

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