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 Tech Data 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, Tech Data has a trailing twelve months PE ratio of 13.77. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.39.
If we focus on the long-term trend of the stock the current level puts Tech Data’s current PE near its highs, with the number having been in a volatile trajectory since the beginning of 2016. Hence, we could infer that it would be prudent to wait for a more suitable entry point to emerge, which seems imminent based on past trends.
Further, the stock’s PE also compares widely favorably with the Zacks classified Retail and Wholesale sector’s trailing twelve months PE ratio, which stands at 27.29. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, Tech Data has historically always traded at a PE less than that of the sector’s over the observed term.
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, Tech Data has a P/S ratio of about 0.13. Also, as we can see in the chart below, this is among the highs for this stock in particular over the past few years. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Notably, the current level is lower than the Zacks categorized Retail and Wholesale sector’s average, which comes in at 0.96 right now. In fact, the figure has been consistently lower than that of the sector over the observed term.
Broad Value Outlook
In aggregate, Tech Data 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 Tech Data a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Tech Data is just 0.44, a level that is far lower than the industry average of 1.21. 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 3.94, which is better than the industry average of 7.34. Clearly, TECD is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Tech Data 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 ‘A’ and a Momentum score of ‘A’. This gives TECD a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Tech Data seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past thirty days compared to two lower, while the full year estimate has seen two upward revisions and two downward revisions in the same time period.
This has had a modest impact on the consensus estimate though as the current quarter consensus estimate has declined 4.7% in the past month, while the full year estimate has inched higher by 4.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Tech Data Corporation Price and Consensus
This mixed trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Tech Data 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 Retail – Computer Hardware industry. Its sluggish industry rank (among the Bottom 3% out of more than 250 industries) and a Zacks Rank #3 make it hard to get excited about the company overall.
Nevertheless, Tech Data has been benefiting from increasing demand for data center systems, cloud and mobility products. Furthermore, the acquisition of Technology Solutions unit from Avnet has open up new growth opportunities. The buyout has not only strengthened its distribution capabilities in Europe and the Americas but has also provided to a new market, i.e. Asia-Pacific region.
However, anticipated PC shipment decline due to increasing prices of components is a major headwind going forward. Lackluster IT spending is also a concern for the company.
So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Image: Bigstock
Is Tech Data (TECD) 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 Tech Data 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, Tech Data has a trailing twelve months PE ratio of 13.77. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.39.
If we focus on the long-term trend of the stock the current level puts Tech Data’s current PE near its highs, with the number having been in a volatile trajectory since the beginning of 2016. Hence, we could infer that it would be prudent to wait for a more suitable entry point to emerge, which seems imminent based on past trends.
Further, the stock’s PE also compares widely favorably with the Zacks classified Retail and Wholesale sector’s trailing twelve months PE ratio, which stands at 27.29. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, Tech Data has historically always traded at a PE less than that of the sector’s over the observed term.
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, Tech Data has a P/S ratio of about 0.13. Also, as we can see in the chart below, this is among the highs for this stock in particular over the past few years. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Notably, the current level is lower than the Zacks categorized Retail and Wholesale sector’s average, which comes in at 0.96 right now. In fact, the figure has been consistently lower than that of the sector over the observed term.
Broad Value Outlook
In aggregate, Tech Data 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 Tech Data a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Tech Data is just 0.44, a level that is far lower than the industry average of 1.21. 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 3.94, which is better than the industry average of 7.34. Clearly, TECD is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Tech Data 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 ‘A’ and a Momentum score of ‘A’. This gives TECD a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Tech Data seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past thirty days compared to two lower, while the full year estimate has seen two upward revisions and two downward revisions in the same time period.
This has had a modest impact on the consensus estimate though as the current quarter consensus estimate has declined 4.7% in the past month, while the full year estimate has inched higher by 4.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Tech Data Corporation Price and Consensus
Tech Data Corporation Price and Consensus | Tech Data Corporation Quote
This mixed trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Tech Data 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 Retail – Computer Hardware industry. Its sluggish industry rank (among the Bottom 3% out of more than 250 industries) and a Zacks Rank #3 make it hard to get excited about the company overall.
Nevertheless, Tech Data has been benefiting from increasing demand for data center systems, cloud and mobility products. Furthermore, the acquisition of Technology Solutions unit from Avnet has open up new growth opportunities. The buyout has not only strengthened its distribution capabilities in Europe and the Americas but has also provided to a new market, i.e. Asia-Pacific region.
However, anticipated PC shipment decline due to increasing prices of components is a major headwind going forward. Lackluster IT spending is also a concern for the company.
So, value investors might want to wait for 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 >>