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Is Big Lots, Inc. (BIG) 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 Big Lots, Inc. (BIG - 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, Big Lots, Inc. has a trailing twelve months PE ratio of 13.60. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.42.
If we focus on the long-term trend of the stock, the current level puts Big Lots, Inc.’s current PE lower than its median (which stands at 14.57) over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its own historical levels and thus it could prove to be a suitable entry point.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Retail - Discount Stores industry’s trailing twelve months PE ratio, which stands at 21.37. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has historically been undervalued than its peers over a major part of the observed period.
We should also point out that Big Lots, Inc. has a forward PE ratio (price relative to this year’s earnings) of 12.66 – which is lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Big Lots, Inc. 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, Big Lots, Inc. has a P/S ratio of about 0.43. This is lower than the Zacks categorized Retail - Discount Stores industry average, which comes in at 0.76 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Big Lots, 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 Big Lots, 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 Big Lots, Inc. is just 0.94, a level that is lower than the industry average of 1.71. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.36, which is far better than the industry average of 8.08. Clearly, BIG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Big Lots, 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 ‘A’. This gives BIG 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, Big Lots, Inc. seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen four estimates go higher in the past thirty days compared to none lower, while the full year estimate has seen five upward revisions and 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 nearly 9%, while the full year estimate has inched higher by 1.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. However, the decidedly bullish analyst sentiment indicates that the stock’s growth story is intact and this stock might just be one that is flying under the radar.
Bottom Line
Big Lots, Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting of a decent industry rank (Top 42% out of more than 250 industries) and a neutral Zacks Rank, the company deserves attention right now.
Notably, the Retail – Discount Stores industry has outperformed the broader market over the last three years, as you can see below:
Big Lots, Inc.’s strategic endeavors, recent uptrend in the gross margin and positive earnings surprise streak in the last five quarters, all indicate that there is still much momentum left in the stock. 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.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Is Big Lots, Inc. (BIG) 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 Big Lots, Inc. (BIG - 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, Big Lots, Inc. has a trailing twelve months PE ratio of 13.60. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.42.
If we focus on the long-term trend of the stock, the current level puts Big Lots, Inc.’s current PE lower than its median (which stands at 14.57) over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its own historical levels and thus it could prove to be a suitable entry point.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Retail - Discount Stores industry’s trailing twelve months PE ratio, which stands at 21.37. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has historically been undervalued than its peers over a major part of the observed period.
We should also point out that Big Lots, Inc. has a forward PE ratio (price relative to this year’s earnings) of 12.66 – which is lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Big Lots, Inc. 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, Big Lots, Inc. has a P/S ratio of about 0.43. This is lower than the Zacks categorized Retail - Discount Stores industry average, which comes in at 0.76 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Big Lots, 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 Big Lots, 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 Big Lots, Inc. is just 0.94, a level that is lower than the industry average of 1.71. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.36, which is far better than the industry average of 8.08. Clearly, BIG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Big Lots, 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 ‘A’. This gives BIG 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, Big Lots, Inc. seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen four estimates go higher in the past thirty days compared to none lower, while the full year estimate has seen five upward revisions and 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 nearly 9%, while the full year estimate has inched higher by 1.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Big Lots, Inc. Price and Consensus
Big Lots, Inc. Price and Consensus | Big Lots, Inc. Quote
This positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. However, the decidedly bullish analyst sentiment indicates that the stock’s growth story is intact and this stock might just be one that is flying under the radar.
Bottom Line
Big Lots, Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting of a decent industry rank (Top 42% out of more than 250 industries) and a neutral Zacks Rank, the company deserves attention right now.
Notably, the Retail – Discount Stores industry has outperformed the broader market over the last three years, as you can see below:
Big Lots, Inc.’s strategic endeavors, recent uptrend in the gross margin and positive earnings surprise streak in the last five quarters, all indicate that there is still much momentum left in the stock. 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.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>