Back to top

Tale of the Tape

Zacks Equity Research

3 Reasons Value Stock Investors Will Love Eastman Chemical (EMN)
November 09, 2016

EMN

Trades from $3

Many investors like to look for value in stocks, but this can be very tough to define. There is great debate regarding which metrics are the best to focus on in this regard, and which are not really quality indicators of future performance. Fortunately, with our new style score system we have identified the key statistics to pay close attention to and thus which stocks might be the best for value investors in the near term.

This method discovered several great candidates for value-oriented investors, but today let’s focus on Eastman Chemical Co. (EMN - Free Report) as this stock is looking especially impressive right now. And while there are numerous reasons why this is the case, we have highlighted three of the most vital reasons for EMN’s status as a solid value stock below:

Forward PE for Eastman Chemical

Easily one of the most popular readings for value investors, the forward PE ratio shows us the current price of a stock divided by the full year earnings. Generally speaking, value investors like to see this ratio below 20, though it can vary by industry.

Right now, EMN has a forward PE of just 10.73, which means that investors are paying $10.73 for each dollar in expected Eastman Chemical earnings this year. Compared to the industry at large this is pretty favorable as the overall space has an average PE of 15.34 in comparison.

EASTMAN CHEM CO PE Ratio (TTM)

Price/Cash Flow for Eastman Chemical Stock

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This reading is preferred by some since it avoids amortization and depreciation concerns and can give a more accurate picture of the financial health in a business.

The P/CF ratio for EMN comes in at 7.81, and since investors are generally looking for a reading under 20 here, this is pretty good news. Meanwhile, we should also point out that the industry average for this metric is 8.68, so Eastman Chemical has its peers beat in this regard too.

EMN Earnings Estimate Revisions Moving in the Right Direction

The solid value ratios outlined in the preceding paragraphs might be enough for some investors, but we should also note that the earnings estimate revisions have been trending in a positive direction as well. Analysts who follow EMN stock have been raising their estimates for the company lately, meaning that the EPS picture is looking a bit more favorably for Eastman Chemical now.

Over the past 60 days, 7 earnings estimates have gone higher compared to none lower for the full year, while we are also seeing that 5 estimates have moved upwards with 2 downward revisions for the next year time frame too.  These revisions have helped to boost the consensus estimate as 60 days ago EMN was expected to post earnings of $6.55 per share for the full year though today it looks to have EPS of $6.74 for the full year.

Bottom Line

For the reasons detailed above, investors shouldn’t be surprised to read that we have EMN as a stock with a Value Score of ‘A’ and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

So if you are a value investor, definitely keep EMN on your short list as this looks to be a stock that is very well-positioned for gains in the near term.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>

In-Depth Zacks Research for the Tickers Above

EASTMAN CHEM CO (EMN) - FREE report >>