Should Value Investors Buy Howmet (HWM) Stock?

Zacks Equity Research

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 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.

One company to watch right now is Howmet (HWM). HWM is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 8.08, while its industry has an average P/E of 15.62. Over the past 52 weeks, HWM's Forward P/E has been as high as 14.78 and as low as 5.05, with a median of 12.02.

Another valuation metric that we should highlight is HWM's P/B ratio of 1.14. 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 stock's P/B looks solid versus its industry's average P/B of 1.89. Within the past 52 weeks, HWM's P/B has been as high as 3.23 and as low as 0.97, with a median of 2.38.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. HWM has a P/S ratio of 0.39. This compares to its industry's average P/S of 0.44.

Finally, our model also underscores that HWM has a P/CF ratio of 5.34. 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. HWM's current P/CF looks attractive when compared to its industry's average P/CF of 16.12. Over the past 52 weeks, HWM's P/CF has been as high as 15.53 and as low as 4.55, with a median of 11.49.

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


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