Is Cardinal Health (CAH) Stock Undervalued 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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 company value investors might notice is Cardinal Health (CAH). CAH is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 15.48, which compares to its industry's average of 17.27. Over the past 52 weeks, CAH's Forward P/E has been as high as 20.15 and as low as 13.69, with a median of 15.30.

Investors will also notice that CAH has a PEG ratio of 1.24. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CAH's industry has an average PEG of 2.05 right now. CAH's PEG has been as high as 1.88 and as low as 1.22, with a median of 1.49, all within the past year.

Finally, our model also underscores that CAH has a P/CF ratio of 15.27. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 16.94. Over the past 52 weeks, CAH's P/CF has been as high as 17.47 and as low as 12.96, with a median of 15.12.

Value investors will likely look at more than just these metrics, but the above data helps show that Cardinal Health is likely undervalued currently. And when considering the strength of its earnings outlook, CAH 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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