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Is Carpenter Technology (CRS) A Great Pick 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 Carpenter Technology Corporation (CRS - 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, Carpenter Technology has a trailing twelve months PE ratio of 14.30, 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 18.02. If we focus on the stock’s long-term PE trend, the current level puts Carpenter Technology’s current PE ratio somewhat below its midpoint (which is 23.47) over the past five years.
However, the stock’s PE compares unfavorably with the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 13.98. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should also point out that Carpenter Technology has a forward PE ratio (price relative to this year’s earnings) of just 12.44, so it is fair to say that a slightly more value-oriented path may be ahead for Carpenter Technology’s stock in the near term too.
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, Carpenter Technology has a P/S ratio of about 0.95. This is substantially lower than the S&P 500 average, which comes in at 3.17 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Carpenter Technology currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes CRS a solid choice for value investors.
What About the Stock Overall?
Though Carpenter Technology 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 C. This gives CRS a 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 encouraging. The current quarter has seen one estimate go higher in the past sixty days compared to none lower, while the full year estimate has seen three upward and no downward revision in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has risen 2.3% in the past two months, while the full year estimate has inched up 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Carpenter Technology Corporation Price and Consensus
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
Carpenter Technology is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (bottom 25% out of more than 250 industries). In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors and industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Is Carpenter Technology (CRS) A Great Pick 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 Carpenter Technology Corporation (CRS - 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, Carpenter Technology has a trailing twelve months PE ratio of 14.30, 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 18.02. If we focus on the stock’s long-term PE trend, the current level puts Carpenter Technology’s current PE ratio somewhat below its midpoint (which is 23.47) over the past five years.
However, the stock’s PE compares unfavorably with the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 13.98. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should also point out that Carpenter Technology has a forward PE ratio (price relative to this year’s earnings) of just 12.44, so it is fair to say that a slightly more value-oriented path may be ahead for Carpenter Technology’s stock in the near term too.
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, Carpenter Technology has a P/S ratio of about 0.95. This is substantially lower than the S&P 500 average, which comes in at 3.17 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Carpenter Technology currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes CRS a solid choice for value investors.
What About the Stock Overall?
Though Carpenter Technology 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 C. This gives CRS a 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 encouraging. The current quarter has seen one estimate go higher in the past sixty days compared to none lower, while the full year estimate has seen three upward and no downward revision in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has risen 2.3% in the past two months, while the full year estimate has inched up 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Carpenter Technology Corporation Price and Consensus
Carpenter Technology Corporation price-consensus-chart | Carpenter Technology Corporation Quote
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
Carpenter Technology is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (bottom 25% out of more than 250 industries). In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors and industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>