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Should Value Investors Buy Amerigo Resources (ARREF) Stock?

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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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

Amerigo Resources (ARREF - Free Report) is a stock many investors are watching right now. ARREF is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 9.15, while its industry has an average P/E of 21.26. Over the past year, ARREF's Forward P/E has been as high as 31.49 and as low as 4.85, with a median of 6.99.

Another notable valuation metric for ARREF is its P/B ratio of 1.71. 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. ARREF's current P/B looks attractive when compared to its industry's average P/B of 3.02. Within the past 52 weeks, ARREF's P/B has been as high as 1.81 and as low as 0.82, with a median of 1.30.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARREF has a P/S ratio of 1.25. This compares to its industry's average P/S of 2.27.

Finally, we should also recognize that ARREF has a P/CF ratio of 8.99. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. ARREF's P/CF compares to its industry's average P/CF of 13.11. Over the past 52 weeks, ARREF's P/CF has been as high as 9.54 and as low as 2.35, with a median of 3.82.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Amerigo Resources is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARREF feels like a great value stock at the moment.


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