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 PCM, Inc. 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, PCM Inc. has a trailing twelve months PE ratio of 14.81. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.37.
If we focus on the long-term trend of the stock the current level puts PCM Inc.’s current PE near its median (which stands at 14.39) over the past five years. Moreover, the current level is well below the highs for the stock, as experienced in 2015 and 2016. Thus, the present level seems to be a suitable entry point for the stock in this respect.
Since a stock’s PE is based on only two inputs, we tried to figure out the reason behind the volatile PE metric. It could either be constantly bad price performance or a favorable earnings trend. We find that in the case of PCM Inc., extremely volatile earnings trend has been the cause for the recent unstable PE multiple, as can be figured out from the graph below:
However, analysts now expect the earnings trend to stabilize over the coming period, after experiencing a slight dip in 2017. This is why the forward PE (price relative to this year’s earnings) for the stock stands at 16.26 currently – a figure higher than the trailing twelve months level.
Further, at present, the stock’s PE also compares favorably with the Zacks classified Consumer Products - Discretionary industry’s trailing twelve months PE ratio, which stands at 20.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, PCM Inc. has a P/S ratio of about 0.16. This is considerably lower than the Zacks categorized Consumer Products - Discretionary industry average, which comes in at 0.57 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
Notably, PCMI is actually at its highest point in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated quite a bit, relative to its sales.
Broad Value Outlook
In aggregate, PCM Inc. currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes PCM Inc. a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for PCM Inc. is just 0.54, a level that is far lower than the industry average of 1.39. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PCMI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though PCM Inc. 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 ‘B’. This gives PCMI 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, PCM Inc. 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 one upward revision versus one downward revision in the same time period.
This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has moved north by 40% in the past month, while the full year estimate has inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
PCM, Inc. Price and Consensus
PCM Inc. has just a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock’s growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
PCM Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a somewhat sluggish industry rank (Bottom 27% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
The Consumer Products – Discretionary industry remains sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact consumers’ discretionary spending, and in turn the related companies’ top and bottom lines.
Notably, the industry has underperformed the broader market over the last two years, as you can see below:
Despite such negative broader factors, the fact remains that PCM Inc. boasts of positive estimate revisions and robust value metrics, which makes us reasonably certain of a strong value contender in it.
So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Should Value Investors Opt For PCM Inc. (PCMI) Stock?
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 PCM, Inc. 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, PCM Inc. has a trailing twelve months PE ratio of 14.81. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.37.
If we focus on the long-term trend of the stock the current level puts PCM Inc.’s current PE near its median (which stands at 14.39) over the past five years. Moreover, the current level is well below the highs for the stock, as experienced in 2015 and 2016. Thus, the present level seems to be a suitable entry point for the stock in this respect.
Since a stock’s PE is based on only two inputs, we tried to figure out the reason behind the volatile PE metric. It could either be constantly bad price performance or a favorable earnings trend. We find that in the case of PCM Inc., extremely volatile earnings trend has been the cause for the recent unstable PE multiple, as can be figured out from the graph below:
However, analysts now expect the earnings trend to stabilize over the coming period, after experiencing a slight dip in 2017. This is why the forward PE (price relative to this year’s earnings) for the stock stands at 16.26 currently – a figure higher than the trailing twelve months level.
Further, at present, the stock’s PE also compares favorably with the Zacks classified Consumer Products - Discretionary industry’s trailing twelve months PE ratio, which stands at 20.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, PCM Inc. has a P/S ratio of about 0.16. This is considerably lower than the Zacks categorized Consumer Products - Discretionary industry average, which comes in at 0.57 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
Notably, PCMI is actually at its highest point in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated quite a bit, relative to its sales.
Broad Value Outlook
In aggregate, PCM Inc. currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes PCM Inc. a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for PCM Inc. is just 0.54, a level that is far lower than the industry average of 1.39. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PCMI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though PCM Inc. 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 ‘B’. This gives PCMI 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, PCM Inc. 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 one upward revision versus one downward revision in the same time period.
This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has moved north by 40% in the past month, while the full year estimate has inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
PCM, Inc. Price and Consensus
PCM, Inc. Price and Consensus | PCM, Inc. Quote
PCM Inc. has just a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock’s growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
PCM Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a somewhat sluggish industry rank (Bottom 27% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
The Consumer Products – Discretionary industry remains sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact consumers’ discretionary spending, and in turn the related companies’ top and bottom lines.
Notably, the industry has underperformed the broader market over the last two years, as you can see below:
Despite such negative broader factors, the fact remains that PCM Inc. boasts of positive estimate revisions and robust value metrics, which makes us reasonably certain of a strong value contender in it.
So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>