Are Investors Undervaluing Donegal Group (DGICA) 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 the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 company to watch right now is Donegal Group (DGICA). DGICA is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 12.41, while its industry has an average P/E of 27.15. Over the last 12 months, DGICA's Forward P/E has been as high as 18.56 and as low as 10.55, with a median of 15.60.
Investors should also recognize that DGICA has a P/B ratio of 0.90. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.42. DGICA's P/B has been as high as 1.01 and as low as 0.74, with a median of 0.94, over the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. DGICA has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.72.
Finally, investors will want to recognize that DGICA has a P/CF ratio of 9.91. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 15.10. DGICA's P/CF has been as high as 23.32 and as low as 5.16, with a median of 14.33, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Donegal Group is likely undervalued currently. And when considering the strength of its earnings outlook, DGICA sticks out at as one of the market's strongest value stocks.
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