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Are Investors Undervaluing Office Depot (ODP) Right Now?

Zacks Equity Research

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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 company value investors might notice is Office Depot (ODP). ODP is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 5.02, while its industry has an average P/E of 13.16. ODP's Forward P/E has been as high as 9.44 and as low as 3.19, with a median of 7.01, all within the past year.

Finally, we should also recognize that ODP has a P/CF ratio of 4.99. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 19.44. ODP's P/CF has been as high as 7.69 and as low as 3.14, with a median of 5.16, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Office Depot is likely undervalued currently. And when considering the strength of its earnings outlook, ODP sticks out at as one of the market's strongest value stocks.


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