Are Investors Undervaluing Textron (TXT) 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, 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.

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.

One stock to keep an eye on is Textron (TXT). TXT is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 12.73 right now. For comparison, its industry sports an average P/E of 28.84. TXT's Forward P/E has been as high as 14.02 and as low as 9.69, with a median of 12.08, all within the past year.

TXT is also sporting a PEG ratio of 1.27. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TXT's PEG compares to its industry's average PEG of 2.02. Over the past 52 weeks, TXT's PEG has been as high as 1.39 and as low as 0.97, with a median of 1.20.

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. TXT has a P/S ratio of 1.06. This compares to its industry's average P/S of 2.32.

Finally, investors will want to recognize that TXT has a P/CF ratio of 12.49. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. TXT's current P/CF looks attractive when compared to its industry's average P/CF of 34.55. Over the past year, TXT's P/CF has been as high as 13.51 and as low as 9.17, with a median of 11.77.

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