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Is Air Transport a Suitable Stock for Value Investors Now?
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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 Air Transport Services Group, Inc (ATSG - 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, Air Transport has a trailing twelve months PE ratio of 19.9, as you can see in the chart below: Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25.7. If we focus on the long-term PE trend, Air Transport’s current PE level puts it slightly above its midpoint over the past five years.
Image Source: Zacks Investment Research
However, the stock’s PE also compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 17.6. This indicates that the stock is relatively overvalued right now, compared to its peers. Image Source: Zacks Investment Research
We should also point out that Air Transport has a forward PE ratio (price relative to this year’s earnings) of just 16.9, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the 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, Air Transport has a P/S ratio of about 1.3. This is noticeably lower than the S&P 500’s average of 5.1. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years. Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Air Transport 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 Air Transport a solid choice for value investors, and another key metric makes this pretty clear too.
For example, the P/CF ratio comes in at 3.7, (which is considerably better than the industry average of 8). Clearly, ATSG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Air Transport 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 ATSG 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 discouraging. Thecurrent quarter has witnessed one estimate trend higher in the past sixty daysand one lower, while the full year has seen two upward and one downward estimate in the same period.
As a result, the consensus estimate for the current quarter and the full year has declined by 14.8% and 0.6%, respectively in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Air Transport Services Group, Inc Price and Consensus
This bearish 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
Air Transport 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 48% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
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 Air Transport a Suitable Stock for Value Investors Now?
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 Air Transport Services Group, Inc (ATSG - 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, Air Transport has a trailing twelve months PE ratio of 19.9, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25.7. If we focus on the long-term PE trend, Air Transport’s current PE level puts it slightly above its midpoint over the past five years.
Image Source: Zacks Investment Research
However, the stock’s PE also compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 17.6. This indicates that the stock is relatively overvalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Air Transport has a forward PE ratio (price relative to this year’s earnings) of just 16.9, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the 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, Air Transport has a P/S ratio of about 1.3. This is noticeably lower than the S&P 500’s average of 5.1. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Air Transport 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 Air Transport a solid choice for value investors, and another key metric makes this pretty clear too.
For example, the P/CF ratio comes in at 3.7, (which is considerably better than the industry average of 8). Clearly, ATSG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Air Transport 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 ATSG 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 discouraging. Thecurrent quarter has witnessed one estimate trend higher in the past sixty daysand one lower, while the full year has seen two upward and one downward estimate in the same period.
As a result, the consensus estimate for the current quarter and the full year has declined by 14.8% and 0.6%, respectively in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Air Transport Services Group, Inc Price and Consensus
Air Transport Services Group, Inc price-consensus-chart | Air Transport Services Group, Inc Quote
This bearish 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
Air Transport 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 48% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
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.