Should Value Investors Buy United States Cellular (USM) Stock?
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.
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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is United States Cellular (USM). USM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.
Investors should also recognize that USM has a P/B ratio of 0.62. The P/B ratio pits a stock's market value against 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 1.75. Within the past 52 weeks, USM's P/B has been as high as 1.02 and as low as 0.52, with a median of 0.71.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. USM has a P/S ratio of 0.65. This compares to its industry's average P/S of 0.85.
Finally, we should also recognize that USM has a P/CF ratio of 3.04. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.72. Over the past year, USM's P/CF has been as high as 5.44 and as low as 2.63, with a median of 3.68.
These figures are just a handful of the metrics value investors tend to look at, but they help show that United States Cellular is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, USM feels like a great value stock at the moment.
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