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Should Value Investors Pick Beacon Roofing Supply (BECN) 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 Beacon Roofing Supply (BECN - 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, Beacon Roofing Supply has a trailing twelve months PE ratio of 13.4, 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 24.8. If we focus on the long-term PE trend, its current PE level puts it below its midpoint over the past five years.
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 29.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Beacon Roofing Supply has a forward PE ratio (price relative to this year’s earnings) of just 11.9, so it is fair to say that a slightly more value-oriented path may be ahead for BECN 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, Beacon Roofing Supply has a P/S ratio of about 0.6. This is a lower than the S&P 500 average, which comes in at 5.2 right now. We can see in the chart below, this is above 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, Beacon Roofing Supply currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Beacon Roofing Supply a solid choice for value investors, and other key metrics makes this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 7.5, (which is somewhat better than the industry average of 11.9). Clearly, Beacon Roofing Supply is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Beacon Roofing Supply 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 F. This gives BECN 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 recent earnings estimates have been robust at best. The current quarter has seen no estimate revision while the current fiscal year has seen five estimates go higher and none moved lower in the past sixty days.
This has had a noticeable impact on the consensus estimate though as the current quarter and the current fiscal year’s consensus estimate has increased by 1.3% and 6.2%, respectively, in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend is why the stock has a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Beacon Roofing Supply is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a solid industry rank (top 1%) and a top Zacks Rank, the company deserves attention right now. However, over the past two years, the sector has underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
Nonetheless, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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Should Value Investors Pick Beacon Roofing Supply (BECN) 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 Beacon Roofing Supply (BECN - 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, Beacon Roofing Supply has a trailing twelve months PE ratio of 13.4, 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 24.8. If we focus on the long-term PE trend, its current PE level puts it below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 29.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Beacon Roofing Supply has a forward PE ratio (price relative to this year’s earnings) of just 11.9, so it is fair to say that a slightly more value-oriented path may be ahead for BECN 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, Beacon Roofing Supply has a P/S ratio of about 0.6. This is a lower than the S&P 500 average, which comes in at 5.2 right now. We can see in the chart below, this is above 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, Beacon Roofing Supply currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Beacon Roofing Supply a solid choice for value investors, and other key metrics makes this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 7.5, (which is somewhat better than the industry average of 11.9). Clearly, Beacon Roofing Supply is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Beacon Roofing Supply 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 F. This gives BECN 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 recent earnings estimates have been robust at best. The current quarter has seen no estimate revision while the current fiscal year has seen five estimates go higher and none moved lower in the past sixty days.
This has had a noticeable impact on the consensus estimate though as the current quarter and the current fiscal year’s consensus estimate has increased by 1.3% and 6.2%, respectively, in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Beacon Roofing Supply, Inc. Price and Consensus
Beacon Roofing Supply, Inc. price-consensus-chart | Beacon Roofing Supply, Inc. Quote
This bullish trend is why the stock has a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Beacon Roofing Supply is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a solid industry rank (top 1%) and a top Zacks Rank, the company deserves attention right now. However, over the past two years, the sector has underperformed the broader market, as you can see below:
Nonetheless, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.