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Is GATX Corporation (GATX) 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 GATX Corporation (GATX - 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, GATX Corporation has a trailing twelve months PE ratio of 10.1. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.04.
If we focus on the long-term trend of the stock the current level puts GATX Corporation’ current PE near its lows. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 17.63. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, GATX Corporation has a P/S ratio of about 1.77. This is higher than the industry average, which comes in at 1.69x right now.
As we can see, the stock is trading near its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, GATX Corporation currently has a Value Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes GATX Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for GATX Corporation is just 0.9, a level that is lower than the industry average of 1.52. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, GATX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though GATX 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 ‘D’ and a Momentum score of ‘D’. This gives GATX 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 earnings estimates have been mixed at best. The current quarter has seen no estimate go higher in the past thirty days compared to three lower, while the full year estimate has seen one upward revision and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has decreased 10.1% over the past month, while the full year estimate has inched up nearly 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat 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
GATX Corporation 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 44% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past year, the respective industry has clearly outperformed the broader market, as you can see below:
Meanwhile, we are impressed by GATX Corporation's efforts to reward investors through share buybacks and dividend payments.
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.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Image: Bigstock
Is GATX Corporation (GATX) 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 GATX Corporation (GATX - 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, GATX Corporation has a trailing twelve months PE ratio of 10.1. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.04.
If we focus on the long-term trend of the stock the current level puts GATX Corporation’ current PE near its lows. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 17.63. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, GATX Corporation has a P/S ratio of about 1.77. This is higher than the industry average, which comes in at 1.69x right now.
As we can see, the stock is trading near its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, GATX Corporation currently has a Value Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes GATX Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for GATX Corporation is just 0.9, a level that is lower than the industry average of 1.52. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, GATX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though GATX 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 ‘D’ and a Momentum score of ‘D’. This gives GATX 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 earnings estimates have been mixed at best. The current quarter has seen no estimate go higher in the past thirty days compared to three lower, while the full year estimate has seen one upward revision and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has decreased 10.1% over the past month, while the full year estimate has inched up nearly 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
GATX Corporation Price and Consensus
GATX Corporation Price and Consensus | GATX Corporation Quote
This somewhat 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
GATX Corporation 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 44% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past year, the respective industry has clearly outperformed the broader market, as you can see below:
Meanwhile, we are impressed by GATX Corporation's efforts to reward investors through share buybacks and dividend payments.
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.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>