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Should Value Investors Consider OFS Capital (OFS) Stock Now?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put OFS Capital Corporation (OFS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, OFS Capital has a trailing twelve months PE ratio of 12.28, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 27.78. If we focus on the long-term PE trend, OFS Capital’s current PE level puts it above its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 19.21. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that OFS Capital has a forward PE ratio (price relative to this year’s earnings) of just 11.10, so it is fair to say that a slightly more value-oriented path may be ahead for OFS Capital stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, OFS Capital has a P/S ratio of about 3.06. This is lower than the S&P 500 average, which comes in at 5.19 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, OFS is toward the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, OFS Capital currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes OFS Capital a solid choice for value investors.
What About the Stock Overall?
Though OFS Capital might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of A. This gives OFS a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending higher. The current year estimate has seen one upward and zero downward revisions in the past sixty day’s period.
As a result, the consensus estimate has risen by 4.7% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
OFS Capital is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 22% out of more than 250 industries). In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Should Value Investors Consider OFS Capital (OFS) Stock Now?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put OFS Capital Corporation (OFS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, OFS Capital has a trailing twelve months PE ratio of 12.28, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 27.78. If we focus on the long-term PE trend, OFS Capital’s current PE level puts it above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 19.21. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that OFS Capital has a forward PE ratio (price relative to this year’s earnings) of just 11.10, so it is fair to say that a slightly more value-oriented path may be ahead for OFS Capital stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, OFS Capital has a P/S ratio of about 3.06. This is lower than the S&P 500 average, which comes in at 5.19 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, OFS is toward the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, OFS Capital currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes OFS Capital a solid choice for value investors.
What About the Stock Overall?
Though OFS Capital might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of A. This gives OFS a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending higher. The current year estimate has seen one upward and zero downward revisions in the past sixty day’s period.
As a result, the consensus estimate has risen by 4.7% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
OFS Capital Corporation Price and Consensus
OFS Capital Corporation price-consensus-chart | OFS Capital Corporation Quote
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
OFS Capital is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 22% out of more than 250 industries). In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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