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Are Investors Undervaluing Old Second Bancorp (OSBC) Right Now?

Zacks

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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system’s “Value” category. Stocks with “A” grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is Old Second Bancorp (OSBC). OSBC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 12.05, while its industry has an average P/E of 12.90. Over the past year, OSBC’s Forward P/E has been as high as 15.31 and as low as 5.69, with a median of 10.36.


Investors should also note that OSBC holds a PEG ratio of 1.45. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. OSBC’s industry currently sports an average PEG of 2.77. Over the last 12 months, OSBC’s PEG has been as high as 1.49 and as low as 1.33, with a median of 1.40.

Another valuation metric that we should highlight is OSBC’s P/B ratio of 0.82. The P/B is a method of comparing a stock’s market value to 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 2.26. Over the past year, OSBC’s P/B has been as high as 1.57 and as low as 0.67, with a median of 1.36.

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. OSBC has a P/S ratio of 1.42. This compares to its industry’s average P/S of 1.74.

Finally, investors will want to recognize that OSBC has a P/CF ratio of 6.07. 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. This stock’s P/CF looks attractive against its industry’s average P/CF of 13.84. OSBC’s P/CF has been as high as 10.40 and as low as 4.27, with a median of 8.71, all within the past year.

These are only a few of the key metrics included in Old Second Bancorp’s strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, OSBC looks like an impressive value stock at the moment.


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Zacks Investment Research
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