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Should Value Investors Buy Yirendai (YRD) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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.

Yirendai (YRD) is a stock many investors are watching right now. YRD is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.

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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. YRD has a P/S ratio of 1.07. This compares to its industry's average P/S of 2.51.

Finally, investors should note that YRD has a P/CF ratio of 5.99. 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. YRD's current P/CF looks attractive when compared to its industry's average P/CF of 19.21. YRD's P/CF has been as high as 7.26 and as low as 3.66, with a median of 5.83, all within the past year.

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


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Zacks Investment Research