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Are Investors Undervaluing Rocket Companies (RKT) Right Now?

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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader 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 stock to keep an eye on is Rocket Companies (RKT). RKT is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. RKT has a P/S ratio of 2.17. This compares to its industry's average P/S of 4.24.

Finally, investors will want to recognize that RKT has a P/CF ratio of 68.02. 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. RKT's current P/CF looks attractive when compared to its industry's average P/CF of 106.92. Over the past year, RKT's P/CF has been as high as 303.82 and as low as 5.12, with a median of 73.71.

These are just a handful of the figures considered in Rocket Companies's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that RKT is an impressive value stock right now.


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