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Is Blucora (BCOR) 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 Blucora, Inc. (BCOR - 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, Blucora has a trailing twelve months PE ratio of 7.3, as you can see in the chart below:

Zacks Investment Research
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 24.7. If we focus on the long-term PE trend, Blucora’s current PE level puts it much below its midpoint over the past five years.

Zacks Investment Research
Image Source: Zacks Investment Research

Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 32.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Zacks Investment Research
Image Source: Zacks Investment Research

We should also point out that Blucora has a forward PE ratio (price relative to this year’s earnings) of just 9.3, which is 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, Blucora has a P/S ratio of about 9.0. This is a lower than the S&P 500 average, which comes in at 4.9 right now. Also, we can see in the chart below, this is below the highs for this stock in particular over the past few years.

Zacks Investment Research
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, Blucora currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Blucora a solid choice for value investors, and other key metrics makes this pretty clear too.

For example, the PEG ratio comes in at 0.6, (which is somewhat better than the industry average of 2.3). Additionally, the P/CF ratio (another great indicator of value) comes in at 8.3, (which is somewhat better than the industry average of 22.4). Clearly, BCOR is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Blucora 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 Score of B and a Momentum Score of B. This gives BCOR 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 mixed at its best. The current quarter has seen zero estimate go higher while two estimates moved down in the past sixty days and the full year has seen two estimates go higher and none lower.

Thus, in the past two months, the Zacks Consensus Estimate for its loss per share for the current quarter has widened from 30 cents to 37 cents, while the full year estimate of earnings has improved by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

The stock holds a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock’s growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.

Bottom Line

Blucora is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.  However, sluggish industry rank (bottom 12%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the sector has underperformed the broader market, as you can see below:

Zacks Investment Research
Image Source: Zacks Investment Research

So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.


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