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.
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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 BorgWarner (BWA). BWA is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.43. This compares to its industry’s average Forward P/E of 12.67. BWA’s Forward P/E has been as high as 10.09 and as low as 6.99, with a median of 8.04, all within the past year.
Investors should also recognize that BWA has a P/B ratio of 1.21. 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 company’s current P/B looks solid when compared to its industry’s average P/B of 1.66. Over the past 12 months, BWA’s P/B has been as high as 1.56 and as low as 1.13, with a median of 1.27.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock’s price with the company’s sales. This is a prefered metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. BWA has a P/S ratio of 0.55. This compares to its industry’s average P/S of 0.7.
Finally, we should also recognize that BWA has a P/CF ratio of 6.14. This metric focuses on a firm’s operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock’s P/CF looks attractive against its industry’s average P/CF of 22.13. Over the past year, BWA’s P/CF has been as high as 7.40 and as low as 5.57, with a median of 6.30.
These are only a few of the key metrics included in BorgWarner’s strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, BWA looks like an impressive value stock at the moment.
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BorgWarner Inc. (BWA) : Free Stock Analysis Report