While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system’s “Value” category. Stocks with “A” grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Sierra Metals Inc. (SMTS). SMTS is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 7.31, while its industry has an average P/E of 11.07. SMTS’s Forward P/E has been as high as 12.50 and as low as 2.59, with a median of 7.64, all within the past year.
Another notable valuation metric for SMTS is its P/B ratio of 2.12. 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. This stock’s P/B looks attractive against its industry’s average P/B of 3.36. Over the past 12 months, SMTS’s P/B has been as high as 2.69 and as low as 0.50, with a median of 1.20.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SMTS has a P/S ratio of 2.16. This compares to its industry’s average P/S of 4.03.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Sierra Metals Inc. Is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SMTS feels like a great value stock at the moment.
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