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Are Investors Undervaluing Sterling Construction (STRL) Right Now?

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...

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This story originally appeared on Zacks

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.

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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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 Sterling Construction (STRL). STRL is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 10.70, which compares to its industry's average of 14.09. Over the last 12 months, STRL's Forward P/E has been as high as 12.85 and as low as 7.54, with a median of 10.88.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. STRL has a P/S ratio of 0.47. This compares to its industry's average P/S of 0.7.

Finally, we should also recognize that STRL has a P/CF ratio of 7.66. 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. STRL's current P/CF looks attractive when compared to its industry's average P/CF of 10.71. Over the past 52 weeks, STRL's P/CF has been as high as 8.94 and as low as 4.06, with a median of 7.53.

These are only a few of the key metrics included in Sterling Construction's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, STRL looks like an impressive value stock at the moment.



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