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 Perry Ellis International, Inc. 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, Perry Ellis has a trailing twelve months PE ratio of 14.47. This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.88. If we focus on the long-term PE trend, Perry Ellis’ current PE level puts it below its midpoint over the past five years.   Moreover, the current level is significantly below the highs for this stock, suggesting it might be a good entry point.

 

Further, the stock’s PE also compares favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 24.87. At the very least, this indicates that the stock is largely undervalued right now, compared to its peers.

 
We should also point out that Perry Ellis has a forward PE ratio (price relative to this year’s earnings) of just 12.48, so it is fair to say that a slightly more value-oriented path may be ahead for Perry Ellis 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, Perry Ellis has a P/S ratio of about 0.43. This is considerably lower than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.



Broad Value Outlook

In aggregate, Perry Ellis currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Perry Ellis a solid choice for value investors.

What About the Stock Overall?

Though Perry Ellis 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 ‘B’ and a Momentum score of ‘C’. This gives PERY a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates go lower in the past sixty days compared to no upward revision, while the full year estimate has seen three upward revisions and no downward revision in the same time period.

This has had a mixed impact on the consensus estimate as well, as the current quarter consensus estimate has tumbled nearly 9% in the past two months, while the full year estimate has gone up by 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Despite the mixed impact on the consensus estimate, the stock boasts a Zacks Rank #2 (Buy), thanks to its other favorable metrics and bullish price trend. This mixed trend indicates that while the stock’s growth story is intact over the medium term, analysts have some apprehensions about the stock in the immediate future.

Also consider the fact that the company boasts a Zacks Rank #2 (Buy), which indicates robust fundamentals and expectations of outperformance in the near term. Thus, we can say that while investors may expect slight short-term pain, Perry Ellis remains a formidable value proposition, with strong supporting growth prospects.

Bottom Line

Perry Ellis is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a solid Zacks Rank, a sluggish industry rank (Bottom 23% out of more than 250 industries), makes is hard to get too excited about this company overall.

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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