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 Time Warner, 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, Time Warner has a trailing twelve months PE ratio of 16.45. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.38.
If we focus on the long-term trend of the stock, the current level puts Time Warner’s current PE at about its median (which stands at 16.58) over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 23.92. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has historically always been undervalued than its peers.
We should also point out that Time Warner has a forward PE ratio (price relative to this year’s earnings) of 16.38 – which is faintly lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Time Warner 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, Time Warner has a P/S ratio of about 2.63. This is slightly lower than the Zacks categorized Consumer Discretionary sector average, which comes in at 2.91 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
Notably, TWX 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, Time Warner 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 Time Warner an apt choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/B ratio (used to compare a stock's market value to its book value) stands at 3.02, lower than the sector average of 4.31. Clearly, TWX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Time Warner 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 ‘B’ and a Momentum score of ‘B’. This gives TWX 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 mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to six lower, while the full year estimate has seen six upward revisions and two downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has inched lower by 10.6% over the past two months, while the full year estimate has moved north by nearly 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Time Warner Inc. Price and Consensus
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Time Warner 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 15% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. It forms a part of the Zacks Categorized Media Conglomerates industry, which ranks among the Bottom 29% out of more than 250 industries.
In fact, over the past two years, the Zacks Media Conglomerates industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Can Time Warner (TWX) be a Suitable Value Pick Right Now?
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 Time Warner, 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, Time Warner has a trailing twelve months PE ratio of 16.45. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.38.
If we focus on the long-term trend of the stock, the current level puts Time Warner’s current PE at about its median (which stands at 16.58) over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 23.92. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has historically always been undervalued than its peers.
We should also point out that Time Warner has a forward PE ratio (price relative to this year’s earnings) of 16.38 – which is faintly lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Time Warner 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, Time Warner has a P/S ratio of about 2.63. This is slightly lower than the Zacks categorized Consumer Discretionary sector average, which comes in at 2.91 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.
Notably, TWX 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, Time Warner 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 Time Warner an apt choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/B ratio (used to compare a stock's market value to its book value) stands at 3.02, lower than the sector average of 4.31. Clearly, TWX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Time Warner 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 ‘B’ and a Momentum score of ‘B’. This gives TWX 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 mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to six lower, while the full year estimate has seen six upward revisions and two downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has inched lower by 10.6% over the past two months, while the full year estimate has moved north by nearly 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Time Warner Inc. Price and Consensus
Time Warner Inc. Price and Consensus | Time Warner Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Time Warner 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 15% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. It forms a part of the Zacks Categorized Media Conglomerates industry, which ranks among the Bottom 29% out of more than 250 industries.
In fact, over the past two years, the Zacks Media Conglomerates industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>