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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
DiamondRock Hospitality (DRH – Free Report) is a stock many investors are watching right now. DRH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.59. This compares to its industry’s average Forward P/E of 15.55. Over the past 52 weeks, DRH’s Forward P/E has been as high as 10.15 and as low as 7.37, with a median of 8.61.
We also note that DRH holds a PEG ratio of 1.87. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. DRH’s industry currently sports an average PEG of 2.37. Within the past year, DRH’s PEG has been as high as 6.23 and as low as 1.82, with a median of 4.95.
We should also highlight that DRH has a P/B ratio of 1.03. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. This stock’s P/B looks attractive against its industry’s average P/B of 1.78. Over the past 12 months, DRH’s P/B has been as high as 1.25 and as low as 0.99, with a median of 1.11.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DRH has a P/S ratio of 1.48. This compares to its industry’s average P/S of 4.03.
Finally, our model also underscores that DRH has a P/CF ratio of 10.14. 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. DRH’s P/CF compares to its industry’s average P/CF of 15.30. Over the past year, DRH’s P/CF has been as high as 11.57 and as low as 8.71, with a median of 10.04.
These are only a few of the key metrics included in DiamondRock Hospitality’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, DRH looks like an impressive value stock at the moment.
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