Should Value Investors Buy Sterling Construction (STRL) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Neverthe…

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September 1, 2021 3 min read

This story originally appeared on Zacks

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the “Value” category. Stocks with high Zacks Ranks and “A” grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Sterling Construction (STRL). STRL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 10.89, while its industry has an average P/E of 15.46. Over the past 52 weeks, STRL’s Forward P/E has been as high as 12.85 and as low as 7.54, with a median of 10.76.

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. STRL has a P/S ratio of 0.46. This compares to its industry’s average P/S of 0.71.

Finally, we should also recognize that STRL has a P/CF ratio of 7.68. 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 company’s current P/CF looks solid when compared to its industry’s average P/CF of 10.75. 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 7.31.

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

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