Are Investors Undervaluing StoneCo (STNE) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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 stock to keep an eye on 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 33.18. 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.

We should also highlight that STNE has a P/B ratio of 2.71. 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. STNE's current P/B looks attractive when compared to its industry's average P/B of 5.81. STNE's P/B has been as high as 2.71 and as low as 0.88, with a median of 1.45, over the past year.

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. STNE has a P/S ratio of 1.75. This compares to its industry's average P/S of 3.86.

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

Zacks' Research Chief Picks Stock Most Likely to "At Least Double"

Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research

Source Zacks-com