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 American Outdoor Brands Corporation 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, American Outdoor Brands has a trailing twelve months PE ratio of 7.92, 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 20.11. If we focus on the long-term PE trend, American Outdoor Brands’ current PE level puts it below its midpoint over the past five years, with the number having fallen gradually over the past few months.

This decrease could be due to the fact that the stock’s price has been on a downtrend while earnings have been on a strong upward trajectory over the past few months. Both of these trends have had a deflating effect on the PE ratio. This clearly suggests that while the stock has achieved strong earnings growth, its price has not yet appreciated enough to reflect the same, which indicates potential upside for the shares in the near future.

Further, the stock’s PE also compares highly favorably with the Zacks classified Aerospace sector’s trailing twelve months PE ratio, which stands at 20.52. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that American Outdoor Brands has a forward PE ratio (price relative to this year’s earnings) of 8.40, 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, American Outdoor Brands has a P/S ratio of about 1.32. This is significantly lower than the S&P 500 average, which comes in at 3.01 right now. Also, as we can see in the chart below, this is below the highs and near the median zone for this stock in particular over the past few years.

If anything this suggests some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, American Outdoor Brands 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 American Outdoor Brands a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for American Outdoor Brands is just 0.56, a level that is lower than the industry average of 1.84. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.14, which is far better than the industry average of 12.03. Clearly, AOBC is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though American Outdoor Brands 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 ‘D’. This gives AOBC 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 at best. The current quarter has seen four estimates go lower in the past sixty days compared to one higher, while the full year estimate has seen two up and one down in the same time period.

This has had a noticeable impact on the consensus estimate though as the current quarter consensus estimate has dropped by 7.1% in the past two months, while the full year estimate has risen by 1.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below: