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Is Swisscom a Great Stock for Value Buying Right 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 Swisscom AG (SCMWY - 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, Swisscom has a trailing twelve months PE ratio of 13.35, 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 20.12. If we focus on the long-term PE trend, Swisscom’s current PE level puts it below its midpoint (which stands at 16.58) 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.
However, when compared to the Zacks classified Diversified Communication Services industry’s trailing twelve months PE ratio (which stands at 12.21), Swisscom looks slightly overvalued as compared to its peers at current levels.
We should also point out that Swisscom has a forward PE ratio (price relative to this year’s earnings) of 15.84, so it is fair to expect an increase in the company’s share price in the near future.
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, Swisscom’s P/CF ratio of 6.11 is lower than the Zacks classified Diversified Communication Services industry’s average of 7.88, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, Swisscom 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 Swisscom a decent choice for value investors.
What About the Stock Overall?
Though Swisscom 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 carries a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives SCMWY a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s earnings estimates have been trending higher. The current year has seen one estimate go higher in the past 30 days as compared to none lower during the same time period. This has had a positive impact on earnings estimates, as the current year consensus estimate has improved by 1.1% over the last 30 days.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend might be why the stock has a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Swisscom is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, despite belonging to a sluggish industry (which is ranked among the Bottom 34% out of more than 250 industries), Swisscom currently sports the top Zacks Rank, which indicates that we expect it to outperform the market in the near future.
So, despite somewhat adverse broader factors, we believe it might pay for value investors to delve deeper into the company’s prospects, as fundamentals and bullish analyst sentiment indicate that this company is a strong value proposition.
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Is Swisscom a Great Stock for Value Buying Right 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 Swisscom AG (SCMWY - 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, Swisscom has a trailing twelve months PE ratio of 13.35, 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 20.12. If we focus on the long-term PE trend, Swisscom’s current PE level puts it below its midpoint (which stands at 16.58) 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.
However, when compared to the Zacks classified Diversified Communication Services industry’s trailing twelve months PE ratio (which stands at 12.21), Swisscom looks slightly overvalued as compared to its peers at current levels.
We should also point out that Swisscom has a forward PE ratio (price relative to this year’s earnings) of 15.84, so it is fair to expect an increase in the company’s share price in the near future.
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, Swisscom’s P/CF ratio of 6.11 is lower than the Zacks classified Diversified Communication Services industry’s average of 7.88, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, Swisscom 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 Swisscom a decent choice for value investors.
What About the Stock Overall?
Though Swisscom 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 carries a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives SCMWY a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s earnings estimates have been trending higher. The current year has seen one estimate go higher in the past 30 days as compared to none lower during the same time period. This has had a positive impact on earnings estimates, as the current year consensus estimate has improved by 1.1% over the last 30 days.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Swisscom AG Price and Consensus
Swisscom AG Price and Consensus | Swisscom AG Quote
This bullish trend might be why the stock has a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Swisscom is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, despite belonging to a sluggish industry (which is ranked among the Bottom 34% out of more than 250 industries), Swisscom currently sports the top Zacks Rank, which indicates that we expect it to outperform the market in the near future.
So, despite somewhat adverse broader factors, we believe it might pay for value investors to delve deeper into the company’s prospects, as fundamentals and bullish analyst sentiment indicate that this company is a strong value proposition.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>