Should Value Investors Buy These Basic Materials Stocks?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Arkema (ARKAY). ARKAY is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 12.23. This compares to its industry's average Forward P/E of 12.37. Over the last 12 months, ARKAY's Forward P/E has been as high as 17.28 and as low as 12.22, with a median of 15.26.

Investors should also note that ARKAY holds a PEG ratio of 0.37. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ARKAY's industry has an average PEG of 0.59 right now. Over the past 52 weeks, ARKAY's PEG has been as high as 8.37 and as low as 0.37, with a median of 0.63.

Another valuation metric that we should highlight is ARKAY's P/B ratio of 1.47. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.49. Over the past 12 months, ARKAY's P/B has been as high as 1.60 and as low as 1.32, with a median of 1.46.

Finally, our model also underscores that ARKAY has a P/CF ratio of 4.27. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. ARKAY's P/CF compares to its industry's average P/CF of 11.21. Over the past 52 weeks, ARKAY's P/CF has been as high as 11.77 and as low as 4, with a median of 7.69.

Investors could also keep in mind Tronox (TROX), an Chemical - Diversified stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Additionally, Tronox has a P/B ratio of 1.81 while its industry's price-to-book ratio sits at 2.49. For TROX, this valuation metric has been as high as 2.02, as low as 1.07, with a median of 1.59 over the past year.

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

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