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.
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 company to watch right now is Rio Tinto (RIO). RIO is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 8.17, while its industry has an average P/E of 11.16. Over the past year, RIO’s Forward P/E has been as high as 12.96 and as low as 7.18, with a median of 9.24.
Another valuation metric that we should highlight is RIO’s P/B ratio of 2.52. 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. RIO’s current P/B looks attractive when compared to its industry’s average P/B of 3.36. Within the past 52 weeks, RIO’s P/B has been as high as 2.52 and as low as 1.02, with a median of 1.74.
These are just a handful of the figures considered in Rio Tinto’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 RIO is an impressive value stock right now.
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