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 International Consolidated Airlines Group, S.A. (ICAGY Quick QuoteICAGY - 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, International Consolidated Airlines has a trailing twelve months PE ratio of 3.59, 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 19.89. If we focus on the long-term PE trend, International Consolidated Airlines’ current PE level puts below its midpoint over the past three years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.



Further, the stock’s PE also compares favorably with the Zacks classified Transportation - Airline industry’s trailing twelve months PE ratio, which stands at 11.35. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



However, we should point out that International Consolidated Airlines has a forward PE ratio (price relative to this year’s earnings) of 7.60, 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, International Consolidated Airlines has a P/S ratio of about 0.34. 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 below the highs for this stock in particular over the past few years.



If anything, ICAGY is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, International Consolidated Airlines 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 International Consolidated Airlines a solid choice for value investors.

What About the Stock Overall?

Though International Consolidated Airlines 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 ‘A’. This gives ICAGY 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 thirty days compared to none lower, while the next year estimate has also seen one 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 27.5% in the past one month, while the next year estimate has increased 19.5%. 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

International Consolidated Airlines is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 21%) and strong Zacks Rank, International Consolidated Airlines looks like a strong value contender. In fact, over the past one year, the Zacks Transportation - Airline industry has clearly outperformed the broader market, as you can see below:



So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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