Should Value Investors Buy CDK Global (CDK) Stock?

By Zacks Investment ResearchStock MarketsMar 23, 2020 11:50PM ET

www.investing.com/analysis/should-value-investors-buy-cdk-global-cdk-stock-200518656

Should Value Investors Buy CDK Global (CDK) Stock?

By Zacks Investment Research | Mar 23, 2020 11:50PM ET

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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 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 value investors might notice is CDK Global (CDK). CDK is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 8.79 right now. For comparison, its industry sports an average P/E of 22.76. Over the past 52 weeks, CDK's Forward P/E has been as high as 16.18 and as low as 8.79, with a median of 13.69.

Investors should also note that CDK holds a PEG ratio of 0.80. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CDK's industry has an average PEG of 2.13 right now. Over the past 52 weeks, CDK's PEG has been as high as 1.54 and as low as 0.80, with a median of 1.30.

Finally, our model also underscores that CDK has a P/CF ratio of 26.71. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 33.52. Over the past 52 weeks, CDK's P/CF has been as high as 48.84 and as low as 12.56, with a median of 28.46.

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

CDK Global, Inc. (CDK): Free Stock Analysis Report

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Should Value Investors Buy CDK Global (CDK) Stock?

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