While the time-tested Zacks Rank emphasizes estimating and reviewing earnings estimates to find strong stocks, we also know that investors develop their own individual strategies. With that in mind, we always look at price, growth and momentum trends to discover great companies.
With these trends in mind, value investing is clearly one of the most preferred methods of finding strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are undervalued by the market as a whole.
In addition to the Zacks Rank, investors looking for stocks with specific characteristics can use our Style Score system. Value investors will, of course, be most interested in the “value” category of systems. Stocks with an “A” rating for value and a high Zacks rank are among the best value stocks available at any given time.
A company value that investors can notice NRG Energy (NRG), NRG currently has a Zacks rank of #2 (Buy), as well as a value class of A. The stock trades with a P/E ratio of 9.35, compared to the industry average of 15.39. Over the past 12 months, NRG’s expected P/E averaged 8.31, with a high of 13.06 and a low of 4.45.
We also note that NRG’s PEG ratio is 0.77. This popular measure is similar to the well-known P/E ratio, except that the PEG ratio also takes into account the company’s expected earnings growth. NRG’s PEG is comparable to the industry average PEG of 2.19. NRG’s PEG ranged as high as 1.24 and as low as 0.13, with a median of 0.62, all in the past year.
Investors should also understand that NRG has a P/B ratio of 1.95. The P/B ratio compares a stock’s market price to its book value, which is defined as total assets minus total liabilities. NRG’s current P/B looks attractive compared to the industry average P/B of 2.21. NRG’s P/B ranged from 2.93 to 1.59 last year, with a median of 1.99.
Finally, our model also highlights that NRG has a P/CF ratio of 3.51. This metric takes into account a company’s operating cash flow and can be used to find stocks that are undervalued based on their solid cash prospects. The stock’s P/CF looks attractive compared to the industry average P/CF of 12.69. Over the past 12 months, NRG’s P/CF ranged from 3.75 to 1.72, with a mean of 2.57.
RWE AG (RWEOY) There may be another strong supply of electrical energy to add to your shortlist. RWEOY is the number 1 (Strong Buy) share with a value class of A.
RWE AG is currently trading with a forward P/E ratio of 10.58 while the PEG ratio is 7.30. Both of the company’s metrics compare favorably with the industry average P/E of 15.39 and average PEG ratio of 2.19.
In the past 12 months, RWEOY’s P/E ratio was as low as 20.53, as low as 8.72, with a median of 17.49, and the PEG ratio was as low as 7.30, with a median of 3.98, as low as 2.45.
RWE AG also has a K/B ratio of 2.87 compared to the industry’s price to book ratio of 2.21. The K/B ratio over the past year varied from 2.96 to 1.14 with a median of 2.32.
These are just some of the key metrics included in NRG Energy and RWE AG Strong Value Grade, but they show that the stock is currently undervalued. Looking at the strong earnings outlook, NRG and RWEOY currently look like an impressive value stock.
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Jax Investment Research