We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Perrigo Company (PRGO) a Great Stock for Value Investors?
Read MoreHide Full Article
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 Perrigo Company plc (PRGO - 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, Perrigo Company has a trailing twelve months PE ratio of 10.91, 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 compares in at about 19.92. If we focus on the stock’s long-term PE trend, the current level puts Perrigo Company’s current PE ratio at its lowest levels over the past five years, as the multiple has fallen steadily since charting highs in mid-2015.
Since a stock’s PE is based on only two inputs, such a fall could have been driven by either consistently bad price performance or a highly favorable earnings trend. If we delve deeper, we find that the company’s price has fallen considerably while earnings have remained more or less stable (trending a bit downward in 2016). However, earnings are expected to resume their growth trajectory in 2017, as shown in the graph below:
These trends indicate that the time might be ripe for investors to get into this undervalued stock.
Further, the stock’s PE also compares favorably with the Zacks classified Medical sector’s trailing twelve months PE ratio, which stands at 18.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Perrigo Company has a forward PE ratio (price relative to this year’s earnings) of just 10.31, so it is fair to say that a slightly more value-oriented path may be ahead for Perrigo Company 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, Perrigo Company has a P/S ratio of about 3.64. This is somewhat higher than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this is much below the highs for this stock in particular over the past few years.
However, if we focus on the stock’s long term trend, we see that the stock’s multiple has always traded higher than the overall market. In fact, the current level is actually near the historical lows for the company in the observed period. Hence, we might conclude that in light of past trends, the stock seems to be trading at a low valuation from a P/S perspective.
Broad Value Outlook
In aggregate, Perrigo Company currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Perrigo Company a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Perrigo Company is just 1.14, a level that is slightly lower than the industry average of 1.99. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, Perrigo Company is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Perrigo Company 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 ‘C’ and a Momentum score of ‘A’. This gives Perrigo Company 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 somewhat disappointing. The current quarter has seen one estimate go higher in the past sixty days and none lower, while the full year estimate has seen one upward and one downward revision in the same time period.
This has had a small impact on the consensus estimate, as the current quarter consensus estimate has dipped 0.6% in the past two months, while the full year estimate has dipped about 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Perrigo Company is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a sluggish industry rank (Bottom 23% out of more than 250 industries) and a Zacks Rank #3, makes it hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Medical Products industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017? Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Is Perrigo Company (PRGO) a Great Stock 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 Perrigo Company plc (PRGO - 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, Perrigo Company has a trailing twelve months PE ratio of 10.91, 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 compares in at about 19.92. If we focus on the stock’s long-term PE trend, the current level puts Perrigo Company’s current PE ratio at its lowest levels over the past five years, as the multiple has fallen steadily since charting highs in mid-2015.
Since a stock’s PE is based on only two inputs, such a fall could have been driven by either consistently bad price performance or a highly favorable earnings trend. If we delve deeper, we find that the company’s price has fallen considerably while earnings have remained more or less stable (trending a bit downward in 2016). However, earnings are expected to resume their growth trajectory in 2017, as shown in the graph below:
These trends indicate that the time might be ripe for investors to get into this undervalued stock.
Further, the stock’s PE also compares favorably with the Zacks classified Medical sector’s trailing twelve months PE ratio, which stands at 18.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Perrigo Company has a forward PE ratio (price relative to this year’s earnings) of just 10.31, so it is fair to say that a slightly more value-oriented path may be ahead for Perrigo Company 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, Perrigo Company has a P/S ratio of about 3.64. This is somewhat higher than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this is much below the highs for this stock in particular over the past few years.
However, if we focus on the stock’s long term trend, we see that the stock’s multiple has always traded higher than the overall market. In fact, the current level is actually near the historical lows for the company in the observed period. Hence, we might conclude that in light of past trends, the stock seems to be trading at a low valuation from a P/S perspective.
Broad Value Outlook
In aggregate, Perrigo Company currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Perrigo Company a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Perrigo Company is just 1.14, a level that is slightly lower than the industry average of 1.99. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, Perrigo Company is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Perrigo Company 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 ‘C’ and a Momentum score of ‘A’. This gives Perrigo Company 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 somewhat disappointing. The current quarter has seen one estimate go higher in the past sixty days and none lower, while the full year estimate has seen one upward and one downward revision in the same time period.
This has had a small impact on the consensus estimate, as the current quarter consensus estimate has dipped 0.6% in the past two months, while the full year estimate has dipped about 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Perrigo Company Price and Consensus
Perrigo Company Price and Consensus | Perrigo Company Quote
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Perrigo Company is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a sluggish industry rank (Bottom 23% out of more than 250 industries) and a Zacks Rank #3, makes it hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Medical Products industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017? Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>