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Will Goodyear (GT) Be a Suitable Pick for Value Investors?
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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 The Goodyear Tire & Rubber Company (GT - 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, Goodyear has a trailing twelve months PE ratio of 7.72. This level compares considerably favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.92.
If we focus on the long-term trend of the stock the current level puts Goodyear’s current PE a little below its median zone (which stands at 8.73), suggesting that the stock is undervalued compared to its historical levels.
Further, the stock’s PE also compares favorably with the Zacks classified Auto, Tires and Trucks sector’s trailing twelve months PE ratio, which stands at 11.05. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, Goodyear has historically traded at a PE less than that of the sector’s over the observed term.
We should also point out that Goodyear has a forward PE ratio (price relative to this year’s earnings) of just 7.24, lower than the current figure. Thus, it is fair to say that a slightly more value-oriented path may be ahead for Goodyear stock in the near term.
PS 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, Goodyear has a P/S ratio of about 0.53. This is lower than the Zacks categorized Building & Auto, Tires and Trucks sector’s average, which comes in at 0.65 right now. In fact, the figure has been consistently lower than that of the sector over the observed term.
However, the current level is among the highs for the stock’s own past and the multiple has been converging to the sector’s average over the past few months. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Goodyear 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 Goodyear a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Goodyear is just 0.42, a level that is far lower than the sector average of 0.99. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, GT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Goodyear 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 ‘F’. This gives GT a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Goodyear seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward revisions and one downward revision in the same time period.
This has had a positive impact on the consensus estimate though, as the current quarter consensus estimate has risen by 2.4% in the past two months, while the full year estimate has inched higher by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The Goodyear Tire & Rubber Company Price and Consensus
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term, relative to the market.
Bottom Line
Goodyear is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
The company forms a part of the Zacks classified Rubber – Tires industry which has a formidable industry rank (among the Top 32%). The industry is enjoying lower cost of raw materials currently, which will boost the profit margins of manufacturers. Moreover, Goodyear’s regular product launches as well as its capital allocation plans to enhance shareholder value, are added positives for the company.
Moreover, over the past two years, the Zacks categorized Rubber – Tires industry has clearly outperformed the broader market, as you can see below:
So, 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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How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
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Will Goodyear (GT) Be a Suitable Pick for Value Investors?
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 The Goodyear Tire & Rubber Company (GT - 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, Goodyear has a trailing twelve months PE ratio of 7.72. This level compares considerably favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.92.
If we focus on the long-term trend of the stock the current level puts Goodyear’s current PE a little below its median zone (which stands at 8.73), suggesting that the stock is undervalued compared to its historical levels.
Further, the stock’s PE also compares favorably with the Zacks classified Auto, Tires and Trucks sector’s trailing twelve months PE ratio, which stands at 11.05. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, Goodyear has historically traded at a PE less than that of the sector’s over the observed term.
We should also point out that Goodyear has a forward PE ratio (price relative to this year’s earnings) of just 7.24, lower than the current figure. Thus, it is fair to say that a slightly more value-oriented path may be ahead for Goodyear stock in the near term.
PS 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, Goodyear has a P/S ratio of about 0.53. This is lower than the Zacks categorized Building & Auto, Tires and Trucks sector’s average, which comes in at 0.65 right now. In fact, the figure has been consistently lower than that of the sector over the observed term.
However, the current level is among the highs for the stock’s own past and the multiple has been converging to the sector’s average over the past few months. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Goodyear 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 Goodyear a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Goodyear is just 0.42, a level that is far lower than the sector average of 0.99. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, GT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Goodyear 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 ‘F’. This gives GT a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Goodyear seems to have pretty striking prospects.
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward revisions and one downward revision in the same time period.
This has had a positive impact on the consensus estimate though, as the current quarter consensus estimate has risen by 2.4% in the past two months, while the full year estimate has inched higher by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The Goodyear Tire & Rubber Company Price and Consensus
The Goodyear Tire & Rubber Company Price and Consensus | The Goodyear Tire & Rubber Company Quote
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term, relative to the market.
Bottom Line
Goodyear is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
The company forms a part of the Zacks classified Rubber – Tires industry which has a formidable industry rank (among the Top 32%). The industry is enjoying lower cost of raw materials currently, which will boost the profit margins of manufacturers. Moreover, Goodyear’s regular product launches as well as its capital allocation plans to enhance shareholder value, are added positives for the company.
Moreover, over the past two years, the Zacks categorized Rubber – Tires industry has clearly outperformed the broader market, as you can see below:
So, 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.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>