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 Meritor, 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, Meritor has a trailing twelve months PE ratio of 10.53, 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 20.18. If we focus on the stock’s long-term PE trend, the current level puts Meritor’s current PE ratio above 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 Auto-Tires-Truck sector’s trailing twelve months PE ratio, which stands at 11.09. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Meritor has a forward PE ratio (price relative to this year’s earnings) of just 11.62, so it is fair to say that the stock price is likely to appreciate in 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, Meritor has a P/S ratio of about 0.47. This is significantly lower than the S&P 500 average, which comes in at 3.06 right now. Also, as we can see in the chart below, this is little below the highs for this stock in particular over the past few years.
If anything, MTOR is in the higher 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, Meritor 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 Meritor a solid choice for value investors.
What About the Stock Overall?
Though Meritor 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 ‘F’ and a Momentum score of D’. This gives MTOR a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company has been witnessing favorable revisions in its recent earnings estimates. The current quarter has seen two estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen three upward and no downward movements in the same time period.
Consequently, the current quarter consensus estimate has inched up by 2.8% in the past two months, while the full year estimate has declined by 5.2%. 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
Meritor is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 8%) and strong Zacks Rank, Meritorlooks like a strong value contender.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Auto-Tires-Truck sector has underperformed the broader market, as you can see below
So, value investors might want to wait for the broader factors to further turn around in this name first, but once that happens, this stock could be a compelling 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 Meritor (MTOR) 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 Meritor, 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, Meritor has a trailing twelve months PE ratio of 10.53, 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 20.18. If we focus on the stock’s long-term PE trend, the current level puts Meritor’s current PE ratio above 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 Auto-Tires-Truck sector’s trailing twelve months PE ratio, which stands at 11.09. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Meritor has a forward PE ratio (price relative to this year’s earnings) of just 11.62, so it is fair to say that the stock price is likely to appreciate in 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, Meritor has a P/S ratio of about 0.47. This is significantly lower than the S&P 500 average, which comes in at 3.06 right now. Also, as we can see in the chart below, this is little below the highs for this stock in particular over the past few years.
If anything, MTOR is in the higher 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, Meritor 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 Meritor a solid choice for value investors.
What About the Stock Overall?
Though Meritor 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 ‘F’ and a Momentum score of D’. This gives MTOR a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company has been witnessing favorable revisions in its recent earnings estimates. The current quarter has seen two estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen three upward and no downward movements in the same time period.
Consequently, the current quarter consensus estimate has inched up by 2.8% in the past two months, while the full year estimate has declined by 5.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Meritor, Inc. Price and Consensus
Meritor, Inc. Price and Consensus | Meritor, Inc. Quote
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
Meritor is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 8%) and strong Zacks Rank, Meritorlooks like a strong value contender.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Auto-Tires-Truck sector has underperformed the broader market, as you can see below
So, value investors might want to wait for the broader factors to further turn around in this name first, but once that happens, this stock could be a compelling 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>>