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Does Autoliv (ALV) Look to be 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 Autoliv, Inc. (ALV - 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, Autoliv has a trailing twelve months PE ratio of 16.12, 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 20.34. If we focus on the long-term PE trend, Autoliv’s current PE level puts it below its midpoint over the past five years, with the number having risen rapidly over the past few months.
However, the stock’s PE compares unfavorably with the Zacks classified Automotive - Original Equipment industry’s trailing twelve months PE ratio, which stands at 13.17. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Autoliv has a forward PE ratio (price relative to this year’s earnings) of just 17.54, so it is fair to say that the stock price might appreciate In 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, Autoliv has a P/S ratio of about 0.94. This is far lower than the S&P 500 average, which comes in at 3.15 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.
If anything, ALV 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, Autoliv 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 Autoliv a solid choice for value investors.
What About the Stock Overall?
Though Autoliv 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 ‘F’. This gives ALV 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 pretty discouraging. The current quarter has seen no estimates going higher in the past sixty days compared to seven lower, while the full year estimate has seen no upward and ten downward movements in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has fallen by 7.5% in the past two months, while the full year estimate has dropped by 3.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish 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
Autoliv is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, with a strong industry rank (Top 16% out of more than 250 industry), it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Automotive - Original Equipment industry has clearly outrperformed 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.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
Image: Bigstock
Does Autoliv (ALV) Look to be 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 Autoliv, Inc. (ALV - 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, Autoliv has a trailing twelve months PE ratio of 16.12, 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 20.34. If we focus on the long-term PE trend, Autoliv’s current PE level puts it below its midpoint over the past five years, with the number having risen rapidly over the past few months.
However, the stock’s PE compares unfavorably with the Zacks classified Automotive - Original Equipment industry’s trailing twelve months PE ratio, which stands at 13.17. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Autoliv has a forward PE ratio (price relative to this year’s earnings) of just 17.54, so it is fair to say that the stock price might appreciate In 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, Autoliv has a P/S ratio of about 0.94. This is far lower than the S&P 500 average, which comes in at 3.15 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.
If anything, ALV 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, Autoliv 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 Autoliv a solid choice for value investors.
What About the Stock Overall?
Though Autoliv 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 ‘F’. This gives ALV 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 pretty discouraging. The current quarter has seen no estimates going higher in the past sixty days compared to seven lower, while the full year estimate has seen no upward and ten downward movements in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has fallen by 7.5% in the past two months, while the full year estimate has dropped by 3.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Autoliv, Inc. Price and Consensus
Autoliv, Inc. Price and Consensus | Autoliv, Inc. Quote
This bearish 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
Autoliv is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, with a strong industry rank (Top 16% out of more than 250 industry), it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Automotive - Original Equipment industry has clearly outrperformed 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.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
Click here for a peek at this private information >>