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 HD Supply Holdings, 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, HD Supply has a trailing twelve months PE ratio of 15.63, 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 20.34. If we focus on the stock’s long-term PE trend, the current level puts HD Supply’s current PE ratio below its midpoint (which is 19.87) over the past three years. Moreover, the current level is way below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.

Further, the stock’s PE also compares favorably with the Zacks classified Industrial Products sector’s trailing twelve months PE ratio, which stands at 22.42. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that HD Supply has a forward PE ratio (price relative to this year’s earnings) of just 12.13, so it is fair to say that a slightly more value-oriented path may be ahead for HD Supply 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, HD Supply has a P/S ratio of about 1.12. This is substantially 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 somewhat below the highs for this stock in particular over the past few years.

If anything, HD Supply is 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, HD Supply 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 HDS a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for HD Supply is just 0.76, a level that is slightly lower than the industry average of 0.99. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, HDS is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though HD Supply 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 HDS a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The full-year 2018 has seen six estimates go higher in the past sixty days, compared to three lower, while the full-year 2019 estimate has seen four upward revisions and one downward revision in the same time period.

This has had a noticeable impact on the consensus estimate, as the full-year 2018 consensus estimate has risen by 0.9% in the past two months, while the full-year 2019 estimate has increased 1.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.

Bottom Line

HD Supply 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 33% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the Zacks Industrial Services sector 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 >>