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 TCF Financial Corporation 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, TCF Financial has a trailing twelve months PE ratio of 14.84, 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 20.24. If we focus on the stock’s long-term PE trend, the current level puts TCF Financial’s current PE ratio below its midpoint over the past five years, with the number remaining somewhat stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Banks-Midwest sector’s trailing twelve months PE ratio, which stands at 17.61. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that TCF Financial has a forward PE ratio (price relative to this year’s earnings) of just 13.87, so it is fair to say that a slightly more value-oriented path may be ahead for TCF Financial 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, TCF Financial has a P/S ratio of about 2.05. This significantly lower than the S&P 500 average, which comes in at 3.07 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, TCF Financial 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 TCF Financial a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for TCF Financial is just 1.68, a level that is tad lower than the industry average of 1.98. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, TCB is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though TCF Financial 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 TCB 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 encouraging. The current year has seen three estimates go higher in the past sixty days compared to three lower, while the full year estimate has seen three up and two down in the same time period.
This has had just a small impact on the consensus estimate though as the current year consensus estimate has inched upper by 0.8% in the past two months, while the next year estimate has risen by almost 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite the bullish analyst sentiments the stock has just a Zacks Rank #3 (Hold) and we are looking for in-line performance from the company in the near term.
Bottom Line
TCF Financial is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a strong industry ranks (among Top 23% of more than 250 industries) increases our confidence on the stock. In fact, over the past two years, the Zacks Banks-Midwest industry has clearly outperformed the broader market, as you can see below:
However, with a Zacks Rank #3, it is hard to get too excited at the moment. Nevertheless, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in TCF Financial.
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Is TCF Financial 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 TCF Financial Corporation 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, TCF Financial has a trailing twelve months PE ratio of 14.84, 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 20.24. If we focus on the stock’s long-term PE trend, the current level puts TCF Financial’s current PE ratio below its midpoint over the past five years, with the number remaining somewhat stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Banks-Midwest sector’s trailing twelve months PE ratio, which stands at 17.61. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that TCF Financial has a forward PE ratio (price relative to this year’s earnings) of just 13.87, so it is fair to say that a slightly more value-oriented path may be ahead for TCF Financial 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, TCF Financial has a P/S ratio of about 2.05. This significantly lower than the S&P 500 average, which comes in at 3.07 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, TCF Financial 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 TCF Financial a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for TCF Financial is just 1.68, a level that is tad lower than the industry average of 1.98. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, TCB is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though TCF Financial 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 TCB 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 encouraging. The current year has seen three estimates go higher in the past sixty days compared to three lower, while the full year estimate has seen three up and two down in the same time period.
This has had just a small impact on the consensus estimate though as the current year consensus estimate has inched upper by 0.8% in the past two months, while the next year estimate has risen by almost 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
TCF Financial Corporation Price and Consensus
TCF Financial Corporation Price and Consensus | TCF Financial Corporation Quote
Despite the bullish analyst sentiments the stock has just a Zacks Rank #3 (Hold) and we are looking for in-line performance from the company in the near term.
Bottom Line
TCF Financial is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a strong industry ranks (among Top 23% of more than 250 industries) increases our confidence on the stock. In fact, over the past two years, the Zacks Banks-Midwest industry has clearly outperformed the broader market, as you can see below:
However, with a Zacks Rank #3, it is hard to get too excited at the moment. Nevertheless, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in TCF Financial.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>