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 Aetna 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, Aetna has a trailing twelve months PE ratio of 15.88, 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 20.48. If we focus on the stock’s long-term PE trend, the current level puts Aetna’s current PE ratio above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Medical sector’s trailing twelve months PE ratio, which stands at 18.89. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Aetna has a forward PE ratio (price relative to this year’s earnings) of 14.92, so it is fair to say that a slightly more value-oriented path may be ahead for Aetna stock in the near term too.
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, Aetna has a P/S ratio of about 0.73. This is significantly lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
If anything, Aetna is trading towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Aetna 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 AET a solid choice for value investors.
What About the Stock Overall?
Though Aetna 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 ‘D’ and a Momentum score of ‘C’. This gives Aetna 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 recent earnings estimates have been encouraging. The current quarter has seen two estimates go higher in the past thirty days, compared to none lower, while the full year estimate has seen three upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has inched up by 0.4% in the past one month, while the full year estimate has risen by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Aetna is enjoying somewhat bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Aetna is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However with a sluggish industry rank (bottom 13% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. However, over the past one year, the Zacks Medical-Health Maintenance Organization sector has clearly outperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think. See This Ticker Free >>
Image: Bigstock
Should Value Investors Consider Aetna (AET) 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 Aetna 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, Aetna has a trailing twelve months PE ratio of 15.88, 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 20.48. If we focus on the stock’s long-term PE trend, the current level puts Aetna’s current PE ratio above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Medical sector’s trailing twelve months PE ratio, which stands at 18.89. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Aetna has a forward PE ratio (price relative to this year’s earnings) of 14.92, so it is fair to say that a slightly more value-oriented path may be ahead for Aetna stock in the near term too.
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, Aetna has a P/S ratio of about 0.73. This is significantly lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
If anything, Aetna is trading towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Aetna 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 AET a solid choice for value investors.
What About the Stock Overall?
Though Aetna 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 ‘D’ and a Momentum score of ‘C’. This gives Aetna 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 recent earnings estimates have been encouraging. The current quarter has seen two estimates go higher in the past thirty days, compared to none lower, while the full year estimate has seen three upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has inched up by 0.4% in the past one month, while the full year estimate has risen by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Aetna Inc. Price and Consensus
Aetna Inc. Price and Consensus | Aetna Inc. Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Aetna is enjoying somewhat bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Aetna is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However with a sluggish industry rank (bottom 13% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. However, over the past one year, the Zacks Medical-Health Maintenance Organization sector has clearly outperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think. See This Ticker Free >>