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 MB Financial 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, MB Financial has a trailing twelve months PE ratio of 17.99, 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 20.20. If we focus on the long-term PE trend, MB Financial’s current PE level puts it above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Banks- Northeast industry’s trailing twelve months PE ratio, which stands at 18.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that MB Financial has a forward PE ratio (price relative to this year’s earnings) of just 16.42, so it is fair to say that a slightly more value-oriented path may be ahead for MB Financial stock in the near term too.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, MB Financial’s P/CF ratio of 12.48 is lower than the Zacks classified Banks-Northeastindustry average of 18.42, which indicates that the stock is somewhat undervalued in this respect.
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Broad Value Outlook
In aggregate, MB Financial 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 MB Financial a solid choice for value investors.
What About the Stock Overall?
Though MB Financial 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 ‘C’. This gives MBFI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been little unfavorable. The current quarter has seen no estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen three upward and one downward movement in the same time period.
This has had a very small impact on the consensus estimate. Although the current quarter consensus estimate has remained unchanged in the past two months, the full year estimate has inched lower by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
MB Financial Inc. Price and Consensus
This somewhat 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
MB Financial is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 34% out of more than 250 industries) further strengthens its growth potential. In fact, over the past two years, the Zacks Banks- Northeast industry has clearly outperformed 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 MB Financial Inc. (MBFI) 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 MB Financial 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, MB Financial has a trailing twelve months PE ratio of 17.99, 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 20.20. If we focus on the long-term PE trend, MB Financial’s current PE level puts it above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Banks- Northeast industry’s trailing twelve months PE ratio, which stands at 18.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that MB Financial has a forward PE ratio (price relative to this year’s earnings) of just 16.42, so it is fair to say that a slightly more value-oriented path may be ahead for MB Financial stock in the near term too.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, MB Financial’s P/CF ratio of 12.48 is lower than the Zacks classified Banks-Northeastindustry average of 18.42, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, MB Financial 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 MB Financial a solid choice for value investors.
What About the Stock Overall?
Though MB Financial 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 ‘C’. This gives MBFI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been little unfavorable. The current quarter has seen no estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen three upward and one downward movement in the same time period.
This has had a very small impact on the consensus estimate. Although the current quarter consensus estimate has remained unchanged in the past two months, the full year estimate has inched lower by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
MB Financial Inc. Price and Consensus
MB Financial Inc. Price and Consensus | MB Financial Inc. Quote
This somewhat 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
MB Financial is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 34% out of more than 250 industries) further strengthens its growth potential. In fact, over the past two years, the Zacks Banks- Northeast industry has clearly outperformed 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.
More Stock News: This Is Bigger than the iPhone
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>