Is CarMax (KMX) Stock Undervalued Right Now?

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.

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 CarMax (KMX). KMX is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 13.89. This compares to its industry's average Forward P/E of 21.31. KMX's Forward P/E has been as high as 25.16 and as low as 13.09, with a median of 19.26, all within the past year.

Investors should also note that KMX holds a PEG ratio of 0.88. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. KMX's industry currently sports an average PEG of 1.43. Within the past year, KMX's PEG has been as high as 1.59 and as low as 0.83, with a median of 1.22.

These are only a few of the key metrics included in CarMax'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, KMX looks like an impressive value stock at the moment.

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CarMax, Inc. (KMX): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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