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 OM Asset Management plc 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, OM Asset Management has a trailing twelve months PE ratio of 10.90, 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 19.92. If we focus on the PE trend, OM Asset Management’s current PE level is slightly below its midpoint over the past two years (which stands at 12.03)

Further, the stock’s PE also compares favorably with the Zacks classified Financial Investment Management industry’s trailing twelve months PE ratio, which stands at 14.96. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that OM Asset Management has a forward PE ratio (price relative to this year’s earnings) of 10.19, which is roughly in line with the current level. Hence the forward earnings estimates are already incorporated in the company’s current share price.

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, OM Asset Management has a P/S ratio of about 2.73. This is a tad lower 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 around the highs for this stock in particular over the past two years.

If anything, OM Asset Management is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.

Broad Value Outlook

In aggregate, OM Asset Management 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 OM Asset Management a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for OM Asset Management is 1.00, a level that is lower than the industry average of 1.58. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, OM Asset Management is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though OM Asset Management 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 ‘D’ and a Momentum score of ‘F’. This gives OMAM a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s earnings estimates have been trending higher. The current quarter has seen two estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen two upwards and none downward in the same time period. While the consensus estimate for the current quarter has improved to 32 cents from 31 cents over the last 60 days, the full year estimate has improved to $1.21 from $1.20 over the same time frame.

You can see the consensus estimate trend and recent price action for the stock in the chart below:

This bullish trend might be why the stock has a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line      

OM Asset Management is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its solid Zacks Rank also indicates robust growth potential in the near future.

However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 31% out of more than 250 industries). In fact, over the past two years, the Zacks Financial-Investment Management industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.

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