Should Value Investors Buy Hanmi Financial (HAFC) Stock?

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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

Hanmi Financial (HAFC) is a stock many investors are watching right now. HAFC is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 9.54, which compares to its industry's average of 9.96. Over the past year, HAFC's Forward P/E has been as high as 11.89 and as low as 7.95, with a median of 9.30.

Another valuation metric that we should highlight is HAFC's P/B ratio of 0.99. Investors use the P/B ratio to look at a stock's market value versus 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 1.28. Within the past 52 weeks, HAFC's P/B has been as high as 1.10 and as low as 0.74, with a median of 0.94.

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. HAFC has a P/S ratio of 1.92. This compares to its industry's average P/S of 2.45.

Finally, our model also underscores that HAFC has a P/CF ratio of 10.15. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. HAFC's current P/CF looks attractive when compared to its industry's average P/CF of 10.97. HAFC's P/CF has been as high as 11.16 and as low as 7.18, with a median of 9.60, all within the past year.

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