Should Value Investors Buy American Equity Investment (AEL) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is American Equity Investment (AEL). AEL is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 6.73, which compares to its industry's average of 9.34. Over the past year, AEL's Forward P/E has been as high as 10.34 and as low as 6.07, with a median of 8.29.
We should also highlight that AEL has a P/B ratio of 0.82. 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 1.77. Over the past 12 months, AEL's P/B has been as high as 1.39 and as low as 0.82, with a median of 1.17.
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. AEL has a P/S ratio of 0.75. This compares to its industry's average P/S of 0.78.
These figures are just a handful of the metrics value investors tend to look at, but they help show that American Equity Investment is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AEL feels like a great value stock at the moment.
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