Are Investors Undervaluing ADT (ADT) Right Now?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

ADT (ADT) is a stock many investors are watching right now. ADT is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 9.49. This compares to its industry's average Forward P/E of 14.04. Over the past 52 weeks, ADT's Forward P/E has been as high as 10.52 and as low as 8.31, with a median of 9.41.

We should also highlight that ADT has a P/B ratio of 1.95. 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. This stock's P/B looks solid versus its industry's average P/B of 4.13. Over the past 12 months, ADT's P/B has been as high as 2.01 and as low as 1.56, with a median of 1.82.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by 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. ADT has a P/S ratio of 1.06. This compares to its industry's average P/S of 2.08.

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

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This article originally published on Zacks Investment Research (zacks.com).

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