Is StoneCo (STNE) Stock Undervalued Right Now?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is StoneCo (STNE). STNE is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 11.19, while its industry has an average P/E of 25.65. STNE's Forward P/E has been as high as 11.19 and as low as 6.09, with a median of 8.65, all within the past year.

Investors should also note that STNE holds a PEG ratio of 0.37. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. STNE's industry has an average PEG of 0.92 right now. Within the past year, STNE's PEG has been as high as 0.45 and as low as 0.28, with a median of 0.35.

Investors should also recognize that STNE has a P/B ratio of 2.71. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 4.34. Within the past 52 weeks, STNE's P/B has been as high as 2.71 and as low as 0.88, with a median of 1.45.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. STNE has a P/S ratio of 1.04. This compares to its industry's average P/S of 2.72.

These are only a few of the key metrics included in StoneCo's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, STNE looks like an impressive value stock at the moment.

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

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