Are Investors Undervaluing ADT (ADT) Right Now?

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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is ADT (ADT). ADT is currently sporting a Zacks Rank #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 9.65, which compares to its industry's average of 18.50. 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 9.37.

We should also highlight that ADT has a P/B ratio of 1.97. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 5.80. ADT's P/B has been as high as 2.01 and as low as 1.56, with a median of 1.79, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ADT has a P/S ratio of 1.43. This compares to its industry's average P/S of 1.98.

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

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

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