Should Value Investors Buy United States Cellular (USM) Stock?
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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 value investors might notice is United States Cellular (USM). USM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.
Investors should also recognize that USM has a P/B ratio of 0.62. 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. USM's current P/B looks attractive when compared to its industry's average P/B of 1.69. USM's P/B has been as high as 0.75 and as low as 0.52, with a median of 0.61, over the past year.
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. USM has a P/S ratio of 0.7. This compares to its industry's average P/S of 1.5.
Finally, investors will want to recognize that USM has a P/CF ratio of 2.99. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.58. Over the past 52 weeks, USM's P/CF has been as high as 3.88 and as low as 2.67, with a median of 3.08.
Value investors will likely look at more than just these metrics, but the above data helps show that United States Cellular is likely undervalued currently. And when considering the strength of its earnings outlook, USM sticks out at as one of the market's strongest value stocks.
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