Should Value Investors Buy Rent-A-Center (RCII) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Neverthe...
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 stock to keep an eye on is Rent-A-Center (RCII). RCII is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.91 right now. For comparison, its industry sports an average P/E of 10.38. Over the last 12 months, RCII's Forward P/E has been as high as 14.94 and as low as 8.44, with a median of 10.07.
Investors should also recognize that RCII has a P/B ratio of 5.23. The P/B ratio is used to compare a stock's market value with 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 6.61. Over the past 12 months, RCII's P/B has been as high as 5.88 and as low as 2.99, with a median of 4.37.
Finally, our model also underscores that RCII has a P/CF ratio of 3.67. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 6.59. Over the past year, RCII's P/CF has been as high as 4.41 and as low as 1.86, with a median of 3.04.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Rent-A-Center is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, RCII feels like a great value stock at the moment.
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