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 UPM-Kymmene Oyj 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, UPM-Kymmene has a trailing twelve months PE ratio of 12.85, 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 stands at about 20.34. If we focus on the long-term PE trend, UPM-Kymmene’s current PE level puts it above its midpoint over the past five years, with the number having trended up roughly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Basic Materials - Paper and Related Products industry’s trailing twelve months PE ratio, which stands at 14.70. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
However, we should point out that UPM-Kymmene has a forward PE ratio (price relative to this year’s earnings) of 13.12, so it is fair to expect an increase in the company’s share price in the near 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, UPM-Kymmene has a P/S ratio of about 1.15. This is significantly lower than the S&P 500 average, which comes in at 3.08 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.
UPMKY is actually in 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.
Broad Value Outlook
In aggregate, UPM-Kymmene 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 UPM-Kymmene a solid choice for value investors.
What About the Stock Overall?
Though UPM-Kymmene 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 ‘C’ and a Momentum score of ‘D’. This gives UPMKY 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 trending higher. The current year has seen one estimate go higher in the past sixty days compared to none lower, and the next year estimate has seen two upward and zero downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate, as the current year consensus estimate has risen by 1.8% in the past two months, while the next year estimate has increased by 4.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
UPM-Kymmene is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, its strong Zacks Rank indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 37% out of more than 250 industries).
In fact, over the past two years, the Zacks Paper and Related Products industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is UPM-Kymmene (UPMKY) 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 UPM-Kymmene Oyj 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, UPM-Kymmene has a trailing twelve months PE ratio of 12.85, 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 stands at about 20.34. If we focus on the long-term PE trend, UPM-Kymmene’s current PE level puts it above its midpoint over the past five years, with the number having trended up roughly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Basic Materials - Paper and Related Products industry’s trailing twelve months PE ratio, which stands at 14.70. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
However, we should point out that UPM-Kymmene has a forward PE ratio (price relative to this year’s earnings) of 13.12, so it is fair to expect an increase in the company’s share price in the near 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, UPM-Kymmene has a P/S ratio of about 1.15. This is significantly lower than the S&P 500 average, which comes in at 3.08 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.
UPMKY is actually in 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.
Broad Value Outlook
In aggregate, UPM-Kymmene 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 UPM-Kymmene a solid choice for value investors.
What About the Stock Overall?
Though UPM-Kymmene 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 ‘C’ and a Momentum score of ‘D’. This gives UPMKY 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 trending higher. The current year has seen one estimate go higher in the past sixty days compared to none lower, and the next year estimate has seen two upward and zero downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate, as the current year consensus estimate has risen by 1.8% in the past two months, while the next year estimate has increased by 4.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
UPM-Kymmene Corp. Price and Consensus
UPM-Kymmene Corp. Price and Consensus | UPM-Kymmene Corp. Quote
This positive trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
UPM-Kymmene is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, its strong Zacks Rank indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 37% out of more than 250 industries).
In fact, over the past two years, the Zacks Paper and Related Products industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>