Many investors like to look for value in stocks, but this can be very tough to define. There is great debate regarding which metrics are the best to focus on in this regard, and which are not really quality indicators of future performance. Fortunately, with our new style score system we have identified the key statistics to pay close attention to and thus which stocks might be the best for value investors in the near term.
This method discovered several great candidates for value-oriented investors, but today let’s focus on ARC Document Solutions, Inc. (NYSE:ARC) as this stock is looking especially impressive right now. And while there are numerous reasons why this is the case, we have highlighted three of the most vital reasons for ARC’s status as a solid value stock below:
Forward PE for ARC Document
Easily one of the most popular readings for value investors, the forward PE ratio shows us the current price of a stock divided by the full year earnings. Generally speaking, value investors like to see this ratio below 20, though it can vary by industry.
Right now, ARC has a forward PE of just 13.46, which means that investors are paying $13.46 for each dollar in expected ARC Document earnings this year. Compared to the industry at large this is pretty favorable as the overall space has an average PE of 34.35 in comparison.
Price to Forward Sales for ARC Document
One of the most underrated ratios for value investors is the price/forward sales metric. This ratio shows investors how much they are paying for each dollar of revenues generated. In other words, a lower number is better here while a price to sales ratio of 1 means that you are paying one dollar for each dollar in sales.
With a P/S ratio of 0.40, ARC investors are paying 40 cents in stock price for each dollar of revenue generated by the company. Compare this to the industry average of 1.25, and it is safe to say that ARC is undervalued compared to many of its peers on this important metric.
ARC Earnings Estimate Revisions Moving in the Right Direction
The solid value ratios outlined in the preceding paragraphs might be enough for some investors, but we should also note that the earnings estimate revisions have been trending in a positive direction as well. Analysts who follow ARC stock have been raising their estimates for the company lately, meaning that the EPS picture is looking a bit more favorably for ARC Document now.
Over the past 60 days, 1 earnings estimate has gone higher compared to no downward revisions for the full year, while we are also seeing 1 upward revision with no downward revisions for the next year time frame too. These revisions have helped to boost the consensus estimate as 60 days ago ARC was expected to post earnings of 22 cents per share for the full year though today it looks to have EPS of 26 cents for the full year.
Bottom Line
For the reasons detailed above, investors shouldn’t be surprised to read that we have ARC as a stock with a Value Score of ‘A’ and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So if you are a value investor, definitely keep ARC on your short list as this looks to be a stock that is very well-positioned for gains in the near term.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>
ARC DOC SOLUT (ARC): Free Stock Analysis Report
Original post
Zacks Investment Research