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 Impax Laboratories, Inc. 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, Impax has a trailing twelve months PE ratio of 7.61, 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 19.86. If we focus on the stock’s long-term PE trend, the current level puts Impax’s current PE ratio is much below its midpoint over the past five years, with the number having fallen rapidly over the past few months. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Delving deeper into the PE's inputs, we observed that the reason behind the rapidly falling PE figure since mid 2015 is due to the fact that the stock’s price has been on a downtrend since then despite strong earnings expansion. This indicates that the price has not yet appreciated enough to reflect the growth in earnings, and thus, the company remains a strong value proposition.
Further, the stock’s PE also compares favorably with the Zacks classified Medical-Generic Drugs sector’s trailing twelve months PE ratio, which stands at 11.44. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Imkpax has a forward PE ratio (price relative to this year’s earnings) of just 9.05, so it is fair to expect an increase in the company’s share price in the near future.
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, Impax has a P/S ratio of about 0.97. This is much lower than the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, IPXL is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Impax 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 Impax a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Impax is just 0.49, a level that is far lower than the industry average of 1.02. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. IPXL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Impax 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 ‘A’ and a Momentum score of ‘F’. This gives IPXL a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed of late. While the consensus estimate for the current quarter has remained flat over the last 60 days, the full year estimate has deteriorated to $1.16 from $1.17 over the same time frame.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
Impax 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 43% out of more than 265 industries). In fact, over the past two years, the Zacks Medical-Generic Drugs industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Impax 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 Impax Laboratories, Inc. 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, Impax has a trailing twelve months PE ratio of 7.61, 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 19.86. If we focus on the stock’s long-term PE trend, the current level puts Impax’s current PE ratio is much below its midpoint over the past five years, with the number having fallen rapidly over the past few months. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Delving deeper into the PE's inputs, we observed that the reason behind the rapidly falling PE figure since mid 2015 is due to the fact that the stock’s price has been on a downtrend since then despite strong earnings expansion. This indicates that the price has not yet appreciated enough to reflect the growth in earnings, and thus, the company remains a strong value proposition.
Further, the stock’s PE also compares favorably with the Zacks classified Medical-Generic Drugs sector’s trailing twelve months PE ratio, which stands at 11.44. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Imkpax has a forward PE ratio (price relative to this year’s earnings) of just 9.05, so it is fair to expect an increase in the company’s share price in the near future.
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, Impax has a P/S ratio of about 0.97. This is much lower than the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, IPXL is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Impax 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 Impax a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Impax is just 0.49, a level that is far lower than the industry average of 1.02. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. IPXL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Impax 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 ‘A’ and a Momentum score of ‘F’. This gives IPXL a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed of late. While the consensus estimate for the current quarter has remained flat over the last 60 days, the full year estimate has deteriorated to $1.16 from $1.17 over the same time frame.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Impax Laboratories Inc. Price and Consensus
Impax Laboratories Inc. Price and Consensus | Impax Laboratories Inc. Quote
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
Impax 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 43% out of more than 265 industries). In fact, over the past two years, the Zacks Medical-Generic Drugs industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to 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. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>