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 Rexnord 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, Rexnord Corporation has a trailing twelve months PE ratio of 17.44, 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 20.35. If we focus on the stock’s long-term PE trend, the current level puts Rexnord Corporation’s current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Manufacturing - Electronics sector’s trailing twelve months PE ratio, which stands at 20.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Rexnord Corporation has a forward PE ratio (price relative to this year’s earnings) of just 18.18, which is tad higher than the current level. So it is fair to expect an increase in the company’s share price in the near term.
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, Rexnord Corporation has a P/S ratio of about 1.27. This is a bit lower than the S&P 500 average, which comes in at 3.16 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.
Broad Value Outlook
In aggregate, Rexnord Corporation 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 Rexnord Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 9.84, which is a little lower than the industry average of 10.04. Clearly, RXN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Rexnord Corporation 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 ‘C’ and a Momentum score of ‘F’. This gives RXN a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been unfavorable. Both the current quarter and full year has seen estimate has seen two estimates going down in the last one month, compared to no movement in the opposite direction.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has decreased by 3.6% in the past one month, while the full year estimate has inched lower by 2.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Notably, the stock has a long term expected earnings growth of 10% and holds a Zacks Rank #3 (Hold).
These mixed expectations indicate that while the stock’s growth story might be solid over the long term, analysts have some apprehensions about its immediate future performance. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Rexnord Corporation 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 (among Bottom 37% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks Manufacturing - Electronics 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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Is Rexnord Corporation 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 Rexnord 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, Rexnord Corporation has a trailing twelve months PE ratio of 17.44, 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 20.35. If we focus on the stock’s long-term PE trend, the current level puts Rexnord Corporation’s current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Manufacturing - Electronics sector’s trailing twelve months PE ratio, which stands at 20.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Rexnord Corporation has a forward PE ratio (price relative to this year’s earnings) of just 18.18, which is tad higher than the current level. So it is fair to expect an increase in the company’s share price in the near term.
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, Rexnord Corporation has a P/S ratio of about 1.27. This is a bit lower than the S&P 500 average, which comes in at 3.16 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.
Broad Value Outlook
In aggregate, Rexnord Corporation 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 Rexnord Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 9.84, which is a little lower than the industry average of 10.04. Clearly, RXN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Rexnord Corporation 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 ‘C’ and a Momentum score of ‘F’. This gives RXN a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been unfavorable. Both the current quarter and full year has seen estimate has seen two estimates going down in the last one month, compared to no movement in the opposite direction.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has decreased by 3.6% in the past one month, while the full year estimate has inched lower by 2.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Rexnord Corporation Price and Consensus
Rexnord Corporation Price and Consensus | Rexnord Corporation Quote
Notably, the stock has a long term expected earnings growth of 10% and holds a Zacks Rank #3 (Hold).
These mixed expectations indicate that while the stock’s growth story might be solid over the long term, analysts have some apprehensions about its immediate future performance. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Rexnord Corporation 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 (among Bottom 37% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks Manufacturing - Electronics 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.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>