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Zacks.com featured highlights Universal Health, General Motors, EnerSys and Itron
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 20, 2024 – Stocks in this week’s article are Universal Health Services, Inc. (UHS - Free Report) , General Motors Co. (GM - Free Report) , EnerSys (ENS - Free Report) and Itron, Inc. (ITRI - Free Report) .
4 Low P/CF Stocks to Buy Now as Market Confidence Soars
All three major U.S. stock indexes ended the week of Aug 16 on a positive note. The S&P 500 and the tech-heavy Nasdaq Composite posted modest gains on Friday, advancing 0.2% and 0.21% respectively, while the Dow Jones Industrial Average rose by 96.7 points, or 0.24%. This uptick follows a period of heightened volatility as investor sentiment has improved in response to favorable economic data.
July's retail sales figure surpassed market expectations, highlighting strong consumer spending activity. Simultaneously, a notable drop in unemployment claims, with jobless claims falling by 7,000 to 227,000 for the week ending Aug 10, has bolstered confidence in the labor market. Additionally, softer-than-expected inflation data has fueled hopes for a more manageable inflationary environment.
These economic indicators have collectively restored market confidence and mitigated fears of a downturn. As a result, analysts are reevaluating their forecasts for Federal Reserve actions, with many now anticipating a more measured approach from the central bank.
In this context, value stocks present a compelling investment opportunity. These stocks offer a margin of safety that growth stocks might lack. In value investing, investors pick stocks that are cheap but fundamentally sound. There are several ratios to identify value stocks but none alone can conclusively determine their inherent potential. Each ratio helps an investor understand a particular aspect of the company’s business.
One such ratio, Price to Cash Flow (or P/CF), can work wonders in stock picking if used prudently. 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 Co., EnerSys and Itron, Inc. boast a low P/CF ratio.
Why P/CF Ratio?
You must be wondering why we are considering this when the most widely used valuation metric is Price/Earnings (or P/E). Well, an important factor that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing a company’s financial health.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. Then again, cash flow is quite reliable. Net cash flow unveils how much money a company generates and how effectively management is deploying the same.
A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, meet its expenses, reinvest in the business, endure downturns and finally undertake shareholder-friendly moves. Negative cash flow implies a decline in the company’s liquidity, which, in turn, lowers its flexibility to support these endeavors.
However, 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 take into account 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 chances of falling into a value trap.
Here are four of the 17 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 51%, respectively, from the year-ago period. Universal Health Services has a Value Score of A. Shares of UHS have risen 76.5% 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 4.2% and 29.4%, respectively, from the year-ago period. General Motors has a Value Score of A. Shares of GM have risen 36.2% in the past year.
EnerSys, the global leader in stored energy solutions for industrial applications, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 1.5%, on average.
The Zacks Consensus Estimate for EnerSys’ current financial year sales and EPS suggests growth of 4.9% and 7.4%, respectively, from the year-ago period. ENS has a Value Score of A. Shares of ENS have lost 4.4% in the past year.
Itron is a technology, solutions, and service company that provides end-to-end solutions to help manage energy, water and smart city operations. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 57%, on average.
The Zacks Consensus Estimate for Itron’s current financial year sales and EPS suggests growth of 10.8% and 33.3%, respectively, from the year-ago period. Itron has a Value Score of B. The stock has rallied 44.9% in the past year.
You can get the rest of the stock 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 Universal Health, General Motors, EnerSys and Itron
For Immediate Release
Chicago, IL – August 20, 2024 – Stocks in this week’s article are Universal Health Services, Inc. (UHS - Free Report) , General Motors Co. (GM - Free Report) , EnerSys (ENS - Free Report) and Itron, Inc. (ITRI - Free Report) .
4 Low P/CF Stocks to Buy Now as Market Confidence Soars
All three major U.S. stock indexes ended the week of Aug 16 on a positive note. The S&P 500 and the tech-heavy Nasdaq Composite posted modest gains on Friday, advancing 0.2% and 0.21% respectively, while the Dow Jones Industrial Average rose by 96.7 points, or 0.24%. This uptick follows a period of heightened volatility as investor sentiment has improved in response to favorable economic data.
July's retail sales figure surpassed market expectations, highlighting strong consumer spending activity. Simultaneously, a notable drop in unemployment claims, with jobless claims falling by 7,000 to 227,000 for the week ending Aug 10, has bolstered confidence in the labor market. Additionally, softer-than-expected inflation data has fueled hopes for a more manageable inflationary environment.
These economic indicators have collectively restored market confidence and mitigated fears of a downturn. As a result, analysts are reevaluating their forecasts for Federal Reserve actions, with many now anticipating a more measured approach from the central bank.
In this context, value stocks present a compelling investment opportunity. These stocks offer a margin of safety that growth stocks might lack. In value investing, investors pick stocks that are cheap but fundamentally sound. There are several ratios to identify value stocks but none alone can conclusively determine their inherent potential. Each ratio helps an investor understand a particular aspect of the company’s business.
One such ratio, Price to Cash Flow (or P/CF), can work wonders in stock picking if used prudently. 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 Co., EnerSys and Itron, Inc. boast a low P/CF ratio.
Why P/CF Ratio?
You must be wondering why we are considering this when the most widely used valuation metric is Price/Earnings (or P/E). Well, an important factor that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing a company’s financial health.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. Then again, cash flow is quite reliable. Net cash flow unveils how much money a company generates and how effectively management is deploying the same.
A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, meet its expenses, reinvest in the business, endure downturns and finally undertake shareholder-friendly moves. Negative cash flow implies a decline in the company’s liquidity, which, in turn, lowers its flexibility to support these endeavors.
However, 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 take into account 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 chances of falling into a value trap.
Here are four of the 17 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 51%, respectively, from the year-ago period. Universal Health Services has a Value Score of A. Shares of UHS have risen 76.5% 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 4.2% and 29.4%, respectively, from the year-ago period. General Motors has a Value Score of A. Shares of GM have risen 36.2% in the past year.
EnerSys, the global leader in stored energy solutions for industrial applications, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 1.5%, on average.
The Zacks Consensus Estimate for EnerSys’ current financial year sales and EPS suggests growth of 4.9% and 7.4%, respectively, from the year-ago period. ENS has a Value Score of A. Shares of ENS have lost 4.4% in the past year.
Itron is a technology, solutions, and service company that provides end-to-end solutions to help manage energy, water and smart city operations. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 57%, on average.
The Zacks Consensus Estimate for Itron’s current financial year sales and EPS suggests growth of 10.8% and 33.3%, respectively, from the year-ago period. Itron has a Value Score of B. The stock has rallied 44.9% in the past year.
You can get the rest of the stock 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/2323587/4-low-pcf-stocks-to-buy-now-as-market-confidence-soars
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.