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Should Value Investors Buy Standard Motor Products (SMP) Stock?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is Standard Motor Products (SMP - Free Report) . SMP is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 8.92 right now. For comparison, its industry sports an average P/E of 12.64. Over the past year, SMP's Forward P/E has been as high as 13.76 and as low as 8.23, with a median of 11.31.
We should also highlight that SMP has a P/B ratio of 1.45. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. SMP's current P/B looks attractive when compared to its industry's average P/B of 2.67. Within the past 52 weeks, SMP's P/B has been as high as 2.01 and as low as 1.33, with a median of 1.64.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. SMP has a P/S ratio of 0.67. This compares to its industry's average P/S of 1.22.
Finally, we should also recognize that SMP has a P/CF ratio of 7.94. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 10.93. Within the past 12 months, SMP's P/CF has been as high as 11.04 and as low as 7.30, with a median of 8.63.
These are only a few of the key metrics included in Standard Motor Products's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SMP looks like an impressive value stock at the moment.