The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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.

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 company to watch right now is The Gap (GAP). GAP is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 10.3 right now. For comparison, its industry sports an average P/E of 15.06. GAP's Forward P/E has been as high as 12.41 and as low as 7.35, with a median of 10.44, all within the past year.

Investors should also recognize that GAP has a P/B ratio of 2.41. The P/B is a method of comparing a stock's market value to 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 6.51. Over the past 12 months, GAP's P/B has been as high as 3.28 and as low as 2.04, with a median of 2.60.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GAP has a P/S ratio of 0.5. This compares to its industry's average P/S of 0.51.

Finally, our model also underscores that GAP has a P/CF ratio of 6.07. 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 outlook. This stock's P/CF looks attractive against its industry's average P/CF of 14.49. GAP's P/CF has been as high as 8.00 and as low as 5.03, with a median of 6.28, all within the past year.

These are only a few of the key metrics included in The Gap'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, GAP looks like an impressive value stock at the moment.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. 

See them now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

The Gap, Inc. (GAP): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research