Here at Zacks, we focus on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find the best stocks. Nevertheless, we are always paying attention to the latest value, growth and momentum trends to highlight strong picks.
With these trends in mind, value investing is clearly one of the most preferred methods for finding strong stocks in any type of market. Value investors use a variety of methods to find these stocks, including tried-and-true valuation metrics.
Zacks has developed the innovative Style Scores system to highlight stocks with distinctive characteristics. For example, value investors will be interested in stocks with good grades in the “value” category. When paired with a high Zacks Rank, the “A” grade in the Value category makes stocks one of the strongest value stocks on the market today.
One company value that investors may notice is Synchrony Financial (SYF), SYF currently sports a Zacks Rank of #2 (Buy) as well as an A grade for Value. The stock’s Forward P/E ratio is 6.20. This compares to its industry’s average Forward P/E of 11.96. SYF’s Forward P/E over the past year has been as high as 7.56 and as low as 5.05, with an average of 6.48.
We also note that SYF has a PEG ratio of 1.40. 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. SYF’s PEG compares to its industry’s average PEG of 1.44. Over the last 12 months, SYF’s PEG has been as high as 1.78 and as low as 0.22, with an average of 1.38.
Another notable valuation metric for SYF is its P/B ratio of 1.08. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. SYF’s current P/B looks attractive compared to its industry’s average P/B of 3.20. Over the past year, SYF’s P/B has been as high as 1.48 and as low as 0.92, with an average of 1.15.
Value investors also often use the P/S ratio. This metric is found by dividing the stock price by the company’s revenue. This is a popular metric because sales are harder to manipulate in the income statement, so they are often considered a better performance indicator. SYF has a P/S ratio of 0.71. This compares to its industry’s average P/S of 1.6.
These are just some of the figures that count towards Synchrony Financial’s great value grade. Still, they help show that the stock is likely undervalued at the moment. Add to this the strength of its earnings outlook, and we can clearly see that SYF is an impressively valued stock at the moment.
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