Unlocking Undervalued Gems: How Zacks Style Scores Highlight NLY and OMC for Value Investors

In a market environment where volatility and uncertainty often dominate headlines, value investors are increasingly turning to robust analytical frameworks to identify stocks that offer compelling risk-reward profiles. Among these tools, Zacks Style Scores have emerged as a powerful lens for uncovering undervalued opportunities. By combining valuation metrics, earnings trends, and momentum indicators, these scores help investors pinpoint stocks like Annaly Capital Management (NLY) and Omnicom Group (OMC)—companies that balance attractive pricing with improving fundamentals.

The Zacks Style Scores Framework: A Value Investor's Compass

Zacks Style Scores evaluate stocks across three dimensions: Value, Growth, and Momentum. For value investors, the focus is on metrics like price-to-earnings (P/E), price-to-earnings-to-growth (PEG), price-to-sales (Price/Sales), and price-to-cash flow (Price/Cash Flow). A stock earns a high Value Style Score when it trades at a discount relative to its industry peers and historical averages while demonstrating positive earnings revisions and surprises.

Annaly Capital Management (NLY): A REIT with Resilient Fundamentals

Annaly Capital Management (NLY), a mortgage real estate investment trust (mREIT), has a Value Style Score of B and a VGM Score of B, signaling its alignment with value investing principles. Despite a current P/E ratio of 21.17—90% above its 10-year average—NLY's valuation appears justified by its earnings trajectory.

Over the past year, NLY's earnings estimates have seen upward revisions, with the Zacks Consensus Estimate rising to $2.89 per share for 2025. The stock has also delivered an average earnings surprise of 2.2%, indicating consistent outperformance of expectations. While its P/E ratio is elevated, other metrics like the Price/Sales ratio of 2.5X and Price/Cash Flow ratio of 6.8X remain favorable compared to the REIT and Equity Trust industry averages.

NLY's Momentum Style Score of B further strengthens its case. The stock has gained 3.4% over the past year and 3.9% in the last four weeks, reflecting investor confidence in its earnings potential. For value investors, NLY represents a compelling opportunity to capitalize on a company with strong earnings momentum and a valuation that, while not dirt-cheap, is supported by fundamentals.

Omnicom Group (OMC): A Marketing Giant Trading Below Fair Value

Omnicom Group (OMC), a global leader in advertising and marketing services, offers a more textbook example of a value stock. With a Value Style Score of A and a VGM Score of A, OMC is undervalued by nearly every metric. Its current P/E ratio of 10.36 is 24% below its 10-year average of 13.66 and significantly lower than the 20.7X industry average for the U.S. Media sector.

OMC's valuation is further bolstered by a Price/Sales ratio of 0.9X and a Price/Cash Flow ratio of 7.8X, both of which are well below industry benchmarks. Analysts project modest earnings growth of 6.78% for 2025, yet the stock trades at a PEG ratio of 1.5X, suggesting it is priced for conservative expectations.

What sets OMC apart is its strong earnings revisions and positive momentum. In the last 60 days, four analysts raised their earnings estimates for 2025, pushing the Zacks Consensus Estimate to $8.46 per share. The stock's Momentum Style Score of A is supported by a 32.07% upside in analyst price targets, with a 12-month average of $96.33 versus its current price of $72.94.

The Case for a Value-Driven Portfolio

Both NLY and OMC exemplify how Zacks Style Scores can identify stocks that balance valuation discipline with earnings resilience. While NLY's higher P/E ratio reflects its role as a defensive play in a volatile market, OMC's low P/E and strong analyst optimism position it as a growth-at-a-reasonable-price (GARP) candidate.

For long-term value investors, the key takeaway is clear: valuation metrics must be viewed in context. A stock's P/E ratio alone does not define its value potential. Instead, the interplay between price, earnings trends, and industry positioning determines whether a stock is truly undervalued.

Strategic Recommendations

1. Annaly Capital Management (NLY): Investors seeking exposure to the REIT sector with a focus on earnings resilience should consider NLY as a core holding. Its B Value Style Score and positive earnings revisions make it a defensive yet growth-oriented choice.
2. Omnicom Group (OMC): With a compelling valuation and strong analyst support, OMC is ideal for investors looking to capitalize on undervalued growth in the advertising sector. Its A Value Style Score and momentum profile suggest a potential breakout in the coming year.

In a market where overhyped tech stocks often dominate headlines, NLY and OMC serve as reminders that value investing remains a viable path to outperformance. By leveraging Zacks Style Scores, investors can cut through the noise and focus on companies with fundamentals that stand the test of time.

As always, due diligence is essential. While these stocks offer attractive entry points, investors should monitor earnings revisions and macroeconomic trends to ensure their positions remain aligned with evolving market conditions.