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 International Consolidated Airlines Group, S.A. (ICAGY Quick QuoteICAGY - 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, International Consolidated Airlines  has a trailing twelve months PE ratio of 3.86, 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 compares in at about 20.20. If we focus on the stock’s long-term PE trend, the current level puts International Consolidated Airlines ’s current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.

Further, the stock’s PE also compares favorably with the Zacks classified Transportation – Airline industry’s trailing twelve months PE ratio, which stands at 9.82. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that International Consolidated Airlines  has a forward PE ratio (price relative to this year’s earnings) of just 7.17. So on the ground of the forward earnings estimates, we might say that the company’s share price is likely to appreciate in the near future.

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, International Consolidated Airlines  has a P/S ratio of about 0.40. This is significantly lower than the S&P 500 average, which comes in at 3.18 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.

If anything, ICAGY is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

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

For example, the PEG ratio for International Consolidated Airlines is just 0.66, a level that is pretty lower than the industry average of 1.32. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, ICAGY is a solid choice on the value front from multiple angles.

What About the Stock Overall?

International Consolidated Airlines seems to be a good choice for value investors, on the back of plenty of other factors as well to be considered 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 ‘B’. This gives ICAGY 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 witnessing favorable revisions. Both the current year and the next year estimates have seen one estimate going higher for each in the past sixty days compared to none lower.

This has had a significant impact on the consensus estimate as the current year consensus estimate has risen by 2.4% in the past two months, and the next year estimate has increased by 6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

International Consolidated Airlines  is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 24%out of more than 250 industries) further strengthens the company’s future growth potential. In fact, over the past three years, the Zacks Transportation - Airlines industry has clearly outperformed the broader S&P 500  market, as you can see below:

So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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