Should Value Investors Buy Heartland Financial USA (HTLF) Stock?

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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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the “Value” category. Stocks with high Zacks Ranks and “A” grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is Heartland Financial USA (HTLF). HTLF is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 8.80, while its industry has an average P/E of 9.72. Over the past year, HTLF’s Forward P/E has been as high as 11.66 and as low as 8.06, with a median of 9.25.

Another valuation metric that we should highlight is HTLF’s P/B ratio of 1.30. The P/B ratio pits a stock’s market value against 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 2.27. HTLF’s P/B has been as high as 1.40 and as low as 0.96, with a median of 1.07, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock’s price with the company’s revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. HTLF has a P/S ratio of 2.68. This compares to its industry’s average P/S of 2.69.

Finally, our model also underscores that HTLF has a P/CF ratio of 6.76. This metric focuses on a firm’s operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. HTLF’s P/CF compares to its industry’s average P/CF of 15.69. Over the past year, HTLF’s P/CF has been as high as 7.91 and as low as 5.68, with a median of 6.66.

Value investors will likely look at more than just these metrics, but the above data helps show that Heartland Financial USA is likely undervalued currently. And when considering the strength of its earnings outlook, HTLF sticks out at as one of the market’s strongest value stocks.

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