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Will Owens Corning Be A Great Stock for Value Investors?
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Will Owens Corning Be A Great Stock for Value Investors?
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 Owens Corning (OC - 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, Owens Corning has a trailing twelve months PE ratio of 14.59. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.72.
If we focus on the long-term trend of the stock the current level puts the Owens Corning’s current PE among its lows. The current PE is well below its median for the term (which stands at 21.05), and the number has fallen rapidly over the past few months. The present level thus seems to be an extremely suitable entry point for the stock.
Further, the stock’s PE also compares favorably with the Zacks classified Building & Construction Products – Miscellaneous industry’s trailing twelve months PE ratio, which stands at 16.29. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS 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, Owens Corning has a P/S ratio of about 1.08. This is a much lower than the industry average, which comes in at 2.02 right now. However, as we can see in the chart below, this is well among highs for this stock in particular over the past few years.
As OC is actually in the higher zone of its trading range in the time period per the P/S metric, this suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Owens Corning 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 Owens Corning a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Owens Corning is just 1.24, a level that is lower than the industry average of 1.66. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 6.02, while the industry’s average stands at 10.44. Clearly, OC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Owens Corning 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 ‘A’ and a Momentum score of ‘B’. This gives OC a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Owens Corning seems to have pretty striking prospects.
On the other hand, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate go higher in the past sixty days compared to two lower, while the full year estimate has seen one upward revision and one downward in the same time period.
This has had just a small impact on the consensus estimate though, as the current quarter consensus estimate remained constant in the past two months, while the full year estimate has inched higher by just 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Owens Corning is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 28% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
Nevertheless, the company’s recent dividend hike declaration and its share repurchase plans have restored our faith in its stable cash position and solid future prospects.
Still, 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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Will Owens Corning Be A Great Stock for Value Investors?
Will Owens Corning Be A Great Stock for Value Investors?
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 Owens Corning (OC - 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, Owens Corning has a trailing twelve months PE ratio of 14.59. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.72.
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If we focus on the long-term trend of the stock the current level puts the Owens Corning’s current PE among its lows. The current PE is well below its median for the term (which stands at 21.05), and the number has fallen rapidly over the past few months. The present level thus seems to be an extremely suitable entry point for the stock.
Further, the stock’s PE also compares favorably with the Zacks classified Building & Construction Products – Miscellaneous industry’s trailing twelve months PE ratio, which stands at 16.29. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS 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, Owens Corning has a P/S ratio of about 1.08. This is a much lower than the industry average, which comes in at 2.02 right now. However, as we can see in the chart below, this is well among highs for this stock in particular over the past few years.
As OC is actually in the higher zone of its trading range in the time period per the P/S metric, this suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Owens Corning 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 Owens Corning a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Owens Corning is just 1.24, a level that is lower than the industry average of 1.66. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 6.02, while the industry’s average stands at 10.44. Clearly, OC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Owens Corning 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 ‘A’ and a Momentum score of ‘B’. This gives OC a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Owens Corning seems to have pretty striking prospects.
On the other hand, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate go higher in the past sixty days compared to two lower, while the full year estimate has seen one upward revision and one downward in the same time period.
This has had just a small impact on the consensus estimate though, as the current quarter consensus estimate remained constant in the past two months, while the full year estimate has inched higher by just 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
OWENS CORNING Price and Consensus
OWENS CORNING Price and Consensus | OWENS CORNING Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Owens Corning is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 28% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
Nevertheless, the company’s recent dividend hike declaration and its share repurchase plans have restored our faith in its stable cash position and solid future prospects.
Still, 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.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>