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Is NetApp (NTAP) a Great Stock for Value Investors?
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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 NetApp, Inc. (NTAP - 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, NetApp has a trailing twelve months PE ratio of 23.06. This level compares somewhat favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.27.
If we focus on the long-term trend of the stock the current level puts NetApp’s current PE slightly among its highs over the observed period, with the number having risen rapidly over the past few months.
Further, the stock’s PE compares slightly higher than the Zacks classified Computer and Technology sector’s trailing twelve months PE ratio, which stands at 21.92. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
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, NetApp has a P/S ratio of about 2.13. This is lower than the Zacks categorized Computer and Technology sector average, which comes in at 3.08 right now.
Notably, NTAP is actually towards 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, NetApp 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 NetApp a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the EV/EBITDA for Ford is just 9.08, a level that is slightly lower than the sector average of 9.53. The EV/EBITDA multiple (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) is capital structure-neutral, as it takes into account the level of debt on a company’s balance sheet, not just its equity. Clearly, NTAP is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though NetApp 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 ‘B’. This gives DST a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen 10 estimates go higher in the past sixty days compared to none lower, while the full year estimate has also seen 10 upward revisions and no downward revision in the same time period.
This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has jumped 13.3% in the past two months, while the full year estimate has moved north by nearly 11%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend signifies bullish analyst sentiment, and the company’s Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
NetApp is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
The company forms a part of the Zacks classified Computer – Storage Devices industry which has a strong industry rank (among the Top 25% out of more than 250 industries). We believe that the company's recent product launches and growing portfolio based on SolidFire acquisition will drive top line growth, going ahead. Meanwhile, cost reduction initiatives will facilitate margin expansion over the long run.
Notably, over the past year, the Zacks categorized Computer – Storage Devices industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for price to correct downwards a bit first, but once that happens, fundamentals indicate that this stock could be a compelling pick.
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While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
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Is NetApp (NTAP) 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 NetApp, Inc. (NTAP - 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, NetApp has a trailing twelve months PE ratio of 23.06. This level compares somewhat favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.27.
If we focus on the long-term trend of the stock the current level puts NetApp’s current PE slightly among its highs over the observed period, with the number having risen rapidly over the past few months.
Further, the stock’s PE compares slightly higher than the Zacks classified Computer and Technology sector’s trailing twelve months PE ratio, which stands at 21.92. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
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, NetApp has a P/S ratio of about 2.13. This is lower than the Zacks categorized Computer and Technology sector average, which comes in at 3.08 right now.
Notably, NTAP is actually towards 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, NetApp 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 NetApp a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the EV/EBITDA for Ford is just 9.08, a level that is slightly lower than the sector average of 9.53. The EV/EBITDA multiple (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) is capital structure-neutral, as it takes into account the level of debt on a company’s balance sheet, not just its equity. Clearly, NTAP is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though NetApp 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 ‘B’. This gives DST a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen 10 estimates go higher in the past sixty days compared to none lower, while the full year estimate has also seen 10 upward revisions and no downward revision in the same time period.
This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has jumped 13.3% in the past two months, while the full year estimate has moved north by nearly 11%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
NetApp, Inc. Price and Consensus
NetApp, Inc. Price and Consensus | NetApp, Inc. Quote
This positive trend signifies bullish analyst sentiment, and the company’s Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
NetApp is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
The company forms a part of the Zacks classified Computer – Storage Devices industry which has a strong industry rank (among the Top 25% out of more than 250 industries). We believe that the company's recent product launches and growing portfolio based on SolidFire acquisition will drive top line growth, going ahead. Meanwhile, cost reduction initiatives will facilitate margin expansion over the long run.
Notably, over the past year, the Zacks categorized Computer – Storage Devices industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for price to correct downwards a bit first, but once that happens, fundamentals indicate that this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can 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.
Click here for Zacks' private trades >>