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 United Rentals, Inc. (URI Quick QuoteURI - 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, United Rentals has a trailing twelve months PE ratio of 14.36. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.36.

If we focus on the long-term trend of the stock the current level puts United Rentals’ current PE near its median (which stands at 13.04) over the observed period. Also, the current level is below the highs experienced for the stock.

Further, the stock’s PE also compares favorably with the Zacks classified Building Products - Miscellaneous industry’s trailing twelve months PE ratio, which stands at 17.29. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has been undervalued compared to its peers, over the observed term.

We should also point out that United Rentals has a forward PE ratio (price relative to this year’s earnings) of just 13.44 – lower than the current level. So it is fair to say that a slightly more value-oriented path may be ahead for United Rentals 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, United Rentals has a P/S ratio of about 1.85. This is lower than the Zacks categorized Building Products - Miscellaneous industry average, which comes in at 2.17 right now.

Notably, URI 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, United Rentals 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 United Rentals a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for United Rentals is just 0.89, a level that is lower than the industry average of 1.36. 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 5.91, which is far better than the industry average of 8.70. Clearly, URI is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though United Rentals 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 URI 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 upwards lately. While the current quarter estimate has inched up 0.7% over the past month, the current year estimate has risen nearly 2% in the same time period, reflecting two upward revisions compared to none lower.

This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

United Rentals is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a sluggish industry rank (among the Bottom 39% out of more than 250 industries) somewhat dims the sparkle for this strong Zacks Rank company.

Notably, over the past three years, the Zacks Building Products - Miscellaneous industry has clearly underperformed the broader market, as you can see below:

Nevertheless, fundamentals indicate that we have a strong value contender in United Rentals and it might pay to delve deeper into the company’s prospects.

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