Back to top

Image: Bigstock

Should Value Investors Buy These Transportation Stocks?

Read MoreHide Full Article

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is ArcBest (ARCB - Free Report) . ARCB is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 9.46 right now. For comparison, its industry sports an average P/E of 19.21. Over the past year, ARCB's Forward P/E has been as high as 97.24 and as low as 9.28, with a median of 12.51.

We should also highlight that ARCB has a P/B ratio of 2.30. 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 4.09. Over the past year, ARCB's P/B has been as high as 3.24 and as low as 1.42, with a median of 2.17.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ARCB has a P/S ratio of 0.59. This compares to its industry's average P/S of 1.27.

Finally, our model also underscores that ARCB has a P/CF ratio of 7.91. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 17.06. ARCB's P/CF has been as high as 11.47 and as low as 5.59, with a median of 8.29, all within the past year.

USA Truck may be another strong Transportation - Truck stock to add to your shortlist. USAK is a # 2 (Buy) stock with a Value grade of A.

Additionally, USA Truck has a P/B ratio of 1.64 while its industry's price-to-book ratio sits at 4.09. For USAK, this valuation metric has been as high as 2.10, as low as 1.07, with a median of 1.56 over the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that ArcBest and USA Truck are likely undervalued currently. And when considering the strength of its earnings outlook, ARCB and USAK sticks out as one of the market's strongest value stocks.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


ArcBest Corporation (ARCB) - free report >>

Published in