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Should Value Investors Buy Donegal Group (DGICA) Stock?

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.

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.

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 stock to keep an eye on is Donegal Group (DGICA). DGICA is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 11.48, while its industry has an average P/E of 22.26. DGICA's Forward P/E has been as high as 16.50 and as low as 10.55, with a median of 13.28, all within the past year.

Another valuation metric that we should highlight is DGICA's P/B ratio of 0.84. 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 1.20. DGICA's P/B has been as high as 0.99 and as low as 0.74, with a median of 0.91, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.77.

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


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