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 UPM-Kymmene Oyj 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, UPM-Kymmene has a trailing twelve months PE ratio of 13.92. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.89.
If we focus on the long-term trend of the stock the current level puts UPM-Kymmene’s current PE near its highs, with the number having been in an upward trend since mid-2016. Hence, we could infer that it would be prudent to wait for a more suitable entry point to emerge, which seems imminent based on past trends.
Further, the stock’s PE currently compares unfavorably with the Zacks classified Paper & Paper Products industry’s trailing twelve months PE ratio, which stands at 13.85. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers. However, UPM-Kymmene has historically always traded at a PE less than that of the industry’s till towards the end of 2016. This clearly shows that the stock is on an uptrend.
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, UPM-Kymmene has a P/S ratio of about 1.24. This is higher than the Zacks categorized Paper & Paper Products industry’s average, which comes in at 0.82 right now. However, the figure had been consistently lower than that of the industry until the beginning of 2016.
Further, as we can see in the chart above, the current level is the highest for this stock in particular over the past few years. This suggests that the company’s stock price has already appreciated, relative to its sales.
Broad Value Outlook
In aggregate, UPM-Kymmene 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 UPM-Kymmene a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/B ratio (used to compare a stock's market value to its book value) stands at 1.55, slightly lower than the industry average of 1.58. Clearly, UPMKY is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though UPM-Kymmene 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 ‘C’ and a Momentum score of ‘A’. This gives UPMKY 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, UPM-Kymmene seems to have pretty striking prospects.
However, the company’s recent earnings estimates have been mixed at best. The current year has seen no estimates go higher in the past sixty days compared to two lower, while the next year estimate has seen one upward revision and one downward revision in the same time period.
This has had a small impact on the consensus estimate though, as the current year consensus estimate moved down 2.3% in the past two months, while the full year estimate inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
UPM-Kymmene Corp. Price and Consensus
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
Although the Zacks categorized Paper & Paper Products industry carries a favorable industry rank (Top 31% out of more than 250 industries), a Zacks Rank #3 somewhat dims the sparkle for this company currently.
Notably, over the past year, the industry has widely outperformed the broader market, as you can see below:
Thus, value investors might want to wait for analyst sentiment to turn around in this name first and for the price to correct downwards a bit. But once that happens, UPM-Kymmene might prove to be a compelling value pick. This is because although the current valuation figures might seem unfavorable in comparison to other benchmarks but the stock’s own historical trend speaks otherwise.
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Can UPM-Kymmene (UPMKY) Be a Top Choice 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 UPM-Kymmene Oyj 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, UPM-Kymmene has a trailing twelve months PE ratio of 13.92. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.89.
If we focus on the long-term trend of the stock the current level puts UPM-Kymmene’s current PE near its highs, with the number having been in an upward trend since mid-2016. Hence, we could infer that it would be prudent to wait for a more suitable entry point to emerge, which seems imminent based on past trends.
Further, the stock’s PE currently compares unfavorably with the Zacks classified Paper & Paper Products industry’s trailing twelve months PE ratio, which stands at 13.85. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers. However, UPM-Kymmene has historically always traded at a PE less than that of the industry’s till towards the end of 2016. This clearly shows that the stock is on an uptrend.
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, UPM-Kymmene has a P/S ratio of about 1.24. This is higher than the Zacks categorized Paper & Paper Products industry’s average, which comes in at 0.82 right now. However, the figure had been consistently lower than that of the industry until the beginning of 2016.
Further, as we can see in the chart above, the current level is the highest for this stock in particular over the past few years. This suggests that the company’s stock price has already appreciated, relative to its sales.
Broad Value Outlook
In aggregate, UPM-Kymmene 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 UPM-Kymmene a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/B ratio (used to compare a stock's market value to its book value) stands at 1.55, slightly lower than the industry average of 1.58. Clearly, UPMKY is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though UPM-Kymmene 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 ‘C’ and a Momentum score of ‘A’. This gives UPMKY 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, UPM-Kymmene seems to have pretty striking prospects.
However, the company’s recent earnings estimates have been mixed at best. The current year has seen no estimates go higher in the past sixty days compared to two lower, while the next year estimate has seen one upward revision and one downward revision in the same time period.
This has had a small impact on the consensus estimate though, as the current year consensus estimate moved down 2.3% in the past two months, while the full year estimate inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
UPM-Kymmene Corp. Price and Consensus
UPM-Kymmene Corp. Price and Consensus | UPM-Kymmene Corp. 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
Although the Zacks categorized Paper & Paper Products industry carries a favorable industry rank (Top 31% out of more than 250 industries), a Zacks Rank #3 somewhat dims the sparkle for this company currently.
Notably, over the past year, the industry has widely outperformed the broader market, as you can see below:
Thus, value investors might want to wait for analyst sentiment to turn around in this name first and for the price to correct downwards a bit. But once that happens, UPM-Kymmene might prove to be a compelling value pick. This is because although the current valuation figures might seem unfavorable in comparison to other benchmarks but the stock’s own historical trend speaks otherwise.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>