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Zacks.com featured highlights include Universal Health Services, General Motors, Unum and PVH
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For Immediate Release
Chicago, IL – August 6, 2024 – Stocks in this week’s article are Universal Health Services, Inc. (UHS - Free Report) , General Motors Company (GM - Free Report) , Unum Group (UNM - Free Report) and PVH Corp. (PVH - Free Report)
4 Low P/CF Stocks to Turn Market Volatility Into Opportunity
The U.S. stock market witnessed a steep decline on Aug 2, 2024, amid growing concerns that the economy is losing steam under the strain of high interest rates intended to combat inflation. The major indices retreated sharply, with the S&P 500 dropping 1.8%, the Nasdaq Composite falling 2.4% and the Dow Jones Industrial Average sliding 1.5%.
Investors were rattled by a weaker-than-expected July jobs report, which signaled a significant slowdown in hiring. The economy added only 114,000 jobs, well below the market’s expectations of 175,000 and a sharp decline from June’s revised figure of 179,000. The unemployment rate climbed to 4.3% from 4.1%, marking its highest level since October 2021, reflecting a sudden and concerning reversal in labor market dynamics.
The tech sector bore the brunt of the market downturn, exacerbated by underwhelming earnings reports that fueled additional selling pressure. Adding to the apprehension, the recent data from the Institute for Supply Management indicated a contraction in U.S. manufacturing activity for the fourth straight month, underscoring broader economic challenges.
This pivotal juncture underscores the importance of a diversified investment approach. We always try to hit the jackpot while picking stocks. But striking the right chord each time is not easy unless blessed with Midas touch. When it comes to the investment market, experts consider value style to be one of the most effective approaches. Value investing is essentially about selecting stocks that have good things going on for them, even at a time when they have been beaten down by some external factors.
There are different valuation metrics to determine a stock’s inherent strength but a random selection of ratios cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, we recommend Price to Cash Flow (or P/CF) as one of the key metrics. This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better. Universal Health Services, Inc., General Motors Company, Unum Group and PVH Corp. boast a low P/CF ratio.
Price to Cash Flow Reveals Financial Health
Questions may arise as to why we are considering the Price to Cash Flow valuation metric when the most widely used metric is Price/Earnings (or P/E). Well, what makes P/CF stand out is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly reflecting the financial health of a company.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use.
A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Then again, a negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
What’s the Best Strategy?
An investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider the price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.
Here are four of the 15 stocks that qualified the screening.
Universal Health Services, one of the nation's largest hospital companies, operating through its subsidiaries, acute care hospitals, behavioral health facilities and ambulatory centers, sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 14.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Universal Health Services’ current financial year sales and EPS suggests growth of 9.8% and 42.6%, respectively, from the year-ago period. Universal Health Services has a Value Score of A. Shares of UHS have risen 56% in the past year.
General Motors, which designs, builds, and sells cars, trucks, crossovers and automobile parts globally, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.8%, on average.
The Zacks Consensus Estimate for General Motors’ current financial year sales and EPS suggests growth of 3.8% and 28.5%, respectively, from the year-ago period. General Motors has a Value Score of A. Shares of GM have risen 11% in the past year.
Unum Group, which provides financial protection benefit solutions, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3%, on average.
The Zacks Consensus Estimate for Unum Group’s current financial year sales and EPS suggests growth of 4.2% and 8.8%, respectively, from the year-ago period. Unum Group has a Value Score of A. Shares of UNM have gained 6.9% in the past year.
PVH Corp., which operates as an apparel company, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.1%, on average.
The Zacks Consensus Estimate for PVH’s current financial year EPS suggests growth of 5.2% from the year-ago period. PVH has a Value Score of A. Shares of PVH have gained 8.8% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include Universal Health Services, General Motors, Unum and PVH
For Immediate Release
Chicago, IL – August 6, 2024 – Stocks in this week’s article are Universal Health Services, Inc. (UHS - Free Report) , General Motors Company (GM - Free Report) , Unum Group (UNM - Free Report) and PVH Corp. (PVH - Free Report)
4 Low P/CF Stocks to Turn Market Volatility Into Opportunity
The U.S. stock market witnessed a steep decline on Aug 2, 2024, amid growing concerns that the economy is losing steam under the strain of high interest rates intended to combat inflation. The major indices retreated sharply, with the S&P 500 dropping 1.8%, the Nasdaq Composite falling 2.4% and the Dow Jones Industrial Average sliding 1.5%.
Investors were rattled by a weaker-than-expected July jobs report, which signaled a significant slowdown in hiring. The economy added only 114,000 jobs, well below the market’s expectations of 175,000 and a sharp decline from June’s revised figure of 179,000. The unemployment rate climbed to 4.3% from 4.1%, marking its highest level since October 2021, reflecting a sudden and concerning reversal in labor market dynamics.
The tech sector bore the brunt of the market downturn, exacerbated by underwhelming earnings reports that fueled additional selling pressure. Adding to the apprehension, the recent data from the Institute for Supply Management indicated a contraction in U.S. manufacturing activity for the fourth straight month, underscoring broader economic challenges.
This pivotal juncture underscores the importance of a diversified investment approach. We always try to hit the jackpot while picking stocks. But striking the right chord each time is not easy unless blessed with Midas touch. When it comes to the investment market, experts consider value style to be one of the most effective approaches. Value investing is essentially about selecting stocks that have good things going on for them, even at a time when they have been beaten down by some external factors.
There are different valuation metrics to determine a stock’s inherent strength but a random selection of ratios cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, we recommend Price to Cash Flow (or P/CF) as one of the key metrics. This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better. Universal Health Services, Inc., General Motors Company, Unum Group and PVH Corp. boast a low P/CF ratio.
Price to Cash Flow Reveals Financial Health
Questions may arise as to why we are considering the Price to Cash Flow valuation metric when the most widely used metric is Price/Earnings (or P/E). Well, what makes P/CF stand out is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly reflecting the financial health of a company.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use.
A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Then again, a negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
What’s the Best Strategy?
An investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider the price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.
Here are four of the 15 stocks that qualified the screening.
Universal Health Services, one of the nation's largest hospital companies, operating through its subsidiaries, acute care hospitals, behavioral health facilities and ambulatory centers, sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 14.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Universal Health Services’ current financial year sales and EPS suggests growth of 9.8% and 42.6%, respectively, from the year-ago period. Universal Health Services has a Value Score of A. Shares of UHS have risen 56% in the past year.
General Motors, which designs, builds, and sells cars, trucks, crossovers and automobile parts globally, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.8%, on average.
The Zacks Consensus Estimate for General Motors’ current financial year sales and EPS suggests growth of 3.8% and 28.5%, respectively, from the year-ago period. General Motors has a Value Score of A. Shares of GM have risen 11% in the past year.
Unum Group, which provides financial protection benefit solutions, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3%, on average.
The Zacks Consensus Estimate for Unum Group’s current financial year sales and EPS suggests growth of 4.2% and 8.8%, respectively, from the year-ago period. Unum Group has a Value Score of A. Shares of UNM have gained 6.9% in the past year.
PVH Corp., which operates as an apparel company, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.1%, on average.
The Zacks Consensus Estimate for PVH’s current financial year EPS suggests growth of 5.2% from the year-ago period. PVH has a Value Score of A. Shares of PVH have gained 8.8% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2315766/4-low-pcf-stocks-to-turn-market-volatility-into-opportunity
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.