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 CBS Corporation 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, CBS Corp. has a trailing twelve months PE ratio of 15.91, 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 19.92. If we focus on the long-term PE trend, current PE level of CBS Corp. puts it below its midpoint over the past five years. Moreover, the current level is below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.

 
Further, the stock’s PE also compares largely favorably with the Zacks classified Broadcasting Radio/TV industry’s trailing twelve months PE ratio, which stands at 32.14. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

 
We should also point out that CBS Corp. has a forward PE ratio (price relative to this year’s earnings) of just 14.14, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term too.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.

The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.

In this case, CBS Corporation’s P/CF ratio of 14.73 is lower than the Zacks classified Broadcasting Radio/TV industry average of 33.38, which indicates that the stock is highly undervalued in this respect.


 

Broad Value Outlook

In aggregate, CBS Corp. 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 CBS Corp. a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for CBS Corp. is just 0.93, a level that is lower than the industry average of 1.81. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.

What About the Stock Overall?

Though CBS Corp. 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 ‘D’ and a Momentum score of ‘D’. This gives CBS 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 mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen one upward and no downward revision in the same time frame.

As a result, the current quarter consensus estimate has dipped by 0.9% in the past two months, while the full year estimate has inched higher by 0.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

CBS Corporation Price and Consensus