Should Value Investors Buy Cardinal Health (CAH) 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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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 to watch right now is Cardinal Health (CAH). CAH is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 11.06 right now. For comparison, its industry sports an average P/E of 19.19. Over the last 12 months, CAH's Forward P/E has been as high as 11.21 and as low as 8.12, with a median of 9.33.
We also note that CAH holds a PEG ratio of 1.79. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CAH's industry currently sports an average PEG of 1.99. CAH's PEG has been as high as 1.82 and as low as 1.31, with a median of 1.52, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Cardinal Health is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CAH feels like a great value stock at the moment.
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