Is Prudential (PRU) Stock Undervalued Right Now?
Zacks Investment Research | Nov 08, 2018 09:10PM ET
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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is Prudential (LON:PRU). PRU is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 7.79, which compares to its industry's average of 9.84. PRU's Forward P/E has been as high as 11.15 and as low as 6.99, with a median of 8.24, all within the past year.
We also note that PRU holds a PEG ratio of 0.87. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PRU's industry has an average PEG of 1 right now. Within the past year, PRU's PEG has been as high as 1.39 and as low as 0.78, with a median of 0.96.
Another valuation metric that we should highlight is PRU's P/B ratio of 0.86. 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. This stock's P/B looks solid versus its industry's average P/B of 1.44. Over the past year, PRU's P/B has been as high as 0.99 and as low as 0.75, with a median of 0.85.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. PRU has a P/S ratio of 0.73. This compares to its industry's average P/S of 1.
Finally, investors should note that PRU has a P/CF ratio of 5.58. 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. PRU's P/CF compares to its industry's average P/CF of 9.42. Over the past year, PRU's P/CF has been as high as 11.15 and as low as 4.95, with a median of 5.57.
These are only a few of the key metrics included in Prudential'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, PRU looks like an impressive value stock at the moment.
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