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Is Interface (TILE) a Great Stock for Value Investors?
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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 Interface, Inc. (TILE - 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, Interface has a trailing twelve months PE ratio of 18.67. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.49.
If we focus on the long-term trend of the stock the current level puts Interface’s current PE among its lows over the past five years. This suggests that the stock is undervalued compared to its own historical levels.
However, the stock’s PE compares unfavorably with the Zacks classified Textile - Home Furnishing industry’s trailing twelve months PE ratio, which stands at 17.83. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers. Nonetheless, as can be seen in the chart below, the stock has been trading cheaper than its peers over the major portion of past few months.
We should also point out that Interface has a forward PE ratio (price relative to this year’s earnings) of 16.65 – which is lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Interface stock in the near term too.
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, Interface has a P/S ratio of about 1.32. This is lower than the Zacks categorized Textile - Home Furnishing industry average, which comes in at 1.55 right now. In fact, since 2015-end, the stock has been relatively undervalued compared to the industry, in this respect.
Notably, TILE is actually towards the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Interface’s PEG ratio stands at just 0.51, compared with the Zacks Textile - Home Furnishing industry average of 2.51. This suggests significant undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Interface 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 Interface a solid choice for value investors.
What About the Stock Overall?
Though Interface 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 ‘A’. This gives TILE 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, Interface seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen one estimate go higher in the past thirty days compared to one lower, while the full year estimate has seen two upward revisions and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has increased 9.5% over the past month, while the full year estimate has inched higher by 1.7%.
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Interface is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Interface is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a decent industry rank (Top 41% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, a positive housing market outlook and an increasing consumer spending expectation bode well for the industry. The Textile - Home Furnishing industry has outperformed the broader market over the last two years also, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this stock a compelling value pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Is Interface (TILE) 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 Interface, Inc. (TILE - 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, Interface has a trailing twelve months PE ratio of 18.67. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.49.
If we focus on the long-term trend of the stock the current level puts Interface’s current PE among its lows over the past five years. This suggests that the stock is undervalued compared to its own historical levels.
However, the stock’s PE compares unfavorably with the Zacks classified Textile - Home Furnishing industry’s trailing twelve months PE ratio, which stands at 17.83. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers. Nonetheless, as can be seen in the chart below, the stock has been trading cheaper than its peers over the major portion of past few months.
We should also point out that Interface has a forward PE ratio (price relative to this year’s earnings) of 16.65 – which is lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Interface stock in the near term too.
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, Interface has a P/S ratio of about 1.32. This is lower than the Zacks categorized Textile - Home Furnishing industry average, which comes in at 1.55 right now. In fact, since 2015-end, the stock has been relatively undervalued compared to the industry, in this respect.
Notably, TILE is actually towards the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Interface’s PEG ratio stands at just 0.51, compared with the Zacks Textile - Home Furnishing industry average of 2.51. This suggests significant undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Interface 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 Interface a solid choice for value investors.
What About the Stock Overall?
Though Interface 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 ‘A’. This gives TILE 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, Interface seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen one estimate go higher in the past thirty days compared to one lower, while the full year estimate has seen two upward revisions and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has increased 9.5% over the past month, while the full year estimate has inched higher by 1.7%.
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Interface is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Interface is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a decent industry rank (Top 41% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, a positive housing market outlook and an increasing consumer spending expectation bode well for the industry. The Textile - Home Furnishing industry has outperformed the broader market over the last two years also, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this stock a compelling value pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>