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Zacks.com featured highlights: Renewable Energy Group, CEMEX, ON Semiconductor and Office Depot

For Immediate Release

Chicago, IL – June 30, 2017 - Stocks in this week’s article include Renewable Energy Group, Inc. (NASDAQ: REGI Free Report ), CEMEX, S.A.B. de C.V. (NYSE: CX Free Report ), ON Semiconductor Corporation (NASDAQ: ON Free Report ) and Office Depot, Inc. (NASDAQ: ODP Free Report ).

Screen of the Week of Zacks Investment Research:

4 Low P/CF Stocks to Add More Value to Your Investment

Value style is considered one of the best practices when it comes to picking stocks. There are different valuation metrics to determine a stock’s inherent strength but a random selection of a ratio cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, we would suggest Price to Cash Flow (or P/CF) ratio as one of the key metrics.

This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis – the lower the number, the better. One of the important factors that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing the financial health of a company.

Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. On the other hand, cash flow is reliable. It is net cash flow that unveils how much money a company is actually generating and how effectively management is deploying the same.

Positive cash flow indicates an increase in the company’s liquid assets. It gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. On the other hand, a negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.

However, an investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and take into account price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of “A” or “B” to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.

The Bargain Hunting Strategy

Here are the parameters for selecting true value stocks:

P/CF less than or equal to X-Industry Median .

Price greater than or equal to 5: The stocks must all be trading at a minimum of $5 or higher.

Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that the stock is easily tradable.

P/E using (F1) less than or equal to X-Industry Median: This parameter shortlists stocks that are trading at a discount or are equal to its peers.

P/B less than or equal to X-Industry Median: A lower P/B compared with the industry average implies that there is enough room for the stock to gain.

P/S less than or equal to X-Industry Median: The P/S ratio determines how a stock price compares to the company’s sales — the lower the ratio the more attractive the stock is.

PEG less than 1: The ratio is used to determine a stock's value by taking the company's earnings growth into account. PEG ratio gives a more complete picture than P/E ratio. A value of less than 1 indicates that the stock is undervalued and that investors need to pay less for a stock that has robust earnings growth prospect.

Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with Zacks Rank #1 or 2 offer the best upside potential.

Here are four of the six stocks that qualified the screening:

Renewable Energy Group, Inc. (NASDAQ:REGI Free Report ) produces and sells biofuels and renewable chemicals in the U.S. The company delivered an average positive earnings surprise of 13.4% over the trailing four quarters and has an expected EPS growth rate of 15% for 3–5 years. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here .

CEMEX, S.A.B. de C.V. (NYSE:CX Free Report ), which produces, markets, and distributes cement, ready-mix concrete, aggregates, clinker, and other construction materials, has an expected EPS growth rate of 18.6% for 3–5 years. Currently, the stock carries a Zacks Rank #2.

ON Semiconductor Corporation (NASDAQ:ON Free Report ), the manufacturer and seller of semiconductor components for various electronic devices, carries a Zacks Rank #2 and has an expected EPS growth rate of 16.7% for 3–5 years. The company delivered an average positive earnings surprise of 5.2% over the trailing four quarters.

Office Depot, Inc. (NASDAQ:ODP Free Report ), which supplies office products and services in North America, also carries a Zacks Rank #2. The company has an expected EPS growth rate of 10.9% for 3–5 years.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Renewable Energy Group, Inc. (REGI): Free Stock Analysis Report
 
Cemex S.A.B. de C.V. (CX): Free Stock Analysis Report
 
ON Semiconductor Corporation (ON): Free Stock Analysis Report
 
Office Depot, Inc. (ODP): Free Stock Analysis Report
 
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