Are Investors Currently Undervaluing Best Buy (BBY)? – November 1, 2021
While the proven Zacks Rank emphasizes earnings estimates and revisions of estimates to find solid stocks, we also know that investors tend to develop their own individual strategies. With that in mind, we always look at trends in value, growth, and momentum to uncover great companies.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven successful in all kinds of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are undervalued by the market as a whole.
In addition to the Zacks Rankings, investors looking for stocks with specific characteristics can use our Style Scores system. Of course, value investors will be more interested in the “Value” category of the system. Stocks with “A” ratings for value and high Zacks ranks are some of the most profitable stocks available at any given time.
One business value that investors might notice is Best Buy (BBY – Free report). BBY currently sports a Zacks rank of 2 (Buy), as well as an A rating for value. The stock is trading with a P / E ratio of 12.57, which compares to its industry average of 20.07. Over the past year, BBY’s forward P / E has reached 16.87 and as low as 10.83, with a median of 13.67.
Investors will also notice that BBY has a PEG ratio of 1.66. This popular metric is similar to the well-known P / E ratio, except that the PEG ratio also takes into account the expected rate of earnings growth of the company. BBY’s industry currently has an average PEG of 2.18. Over the past 12 months, BBY’s PEG has been as high as 2.28 and as low as 1.26, with a median of 1.57.
Another notable valuation metric for BBY is its P / N ratio of 6.87. The P / B ratio pits the market value of a stock against its book value, which is defined as total assets minus total liabilities. This stock’s P / B looks attractive compared to its sector’s average P / B of 10.23. Over the past year, BBY’s P / B has been as high as 7.80 and as low as 5.55, with a median of 6.68.
Value investors also like the P / S ratio, which is calculated by simply dividing the price of a stock by the sales of the company. This is a popular metric because sales are more difficult to manipulate on an income statement, so they are often seen as a better indicator of performance. BBY has a P / S ratio of 0.58. This compares to its industry’s average P / S of 1.4.
Finally, investors should note that BBY has a P / CF ratio of 9.03. This data point takes into account a company’s operating cash flow and is frequently used to find undervalued companies when considering their strong cash flow outlook. BBY’s current P / CF looks attractive compared to its industry average P / CF of 11.41. In the past year, BBY’s P / CF hit 12.68 and as low as 7.81, with a median of 10.15.
These are just a few of the key metrics included in Best Buy’s strong Value rating, but they help show that the stock is likely undervalued right now. Considering the strength of its earnings outlook, BBY looks like an impressive value stock for now.