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Is Avis Budget a Great Stock for Value Buying Right Now?
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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 Avis Budget Group, Inc. (CAR - 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, Avis Budget has a trailing twelve months PE ratio of 10.93, 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 20.35. If we focus on the long-term PE trend, Avis Budget’s current PE level puts it below its midpoint over the past two years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Business Services industry’s trailing twelve months PE ratio, which stands at 20.62. At the very least, this indicates that the stock is largely undervalued right now, compared to its peers.
We should also point out that Avis Budget has a forward PE ratio (price relative to this year’s earnings) of 9.54, so it is fair to say that a slightly more value-oriented path may be ahead for Avis Budget 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, Avis Budget has a P/S ratio of about 0.33. This is considerably lower than the S&P 500 average, which comes in at 3.14 right now. Also, as we can see in the chart below, this is below the midpoint (which stands at 0.41) for this stock in particular over the past two years.
If anything, Avis Budget 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, Avis Budget 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 Avis Budget a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 1.03, which is far better than the industry average of 5.97. Clearly, Avis Budget is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Avis Budget 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 ‘F’. This gives Avis Budget 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 quite bearish. The current year has seen one upward and two downward estimate revisions in the past sixty days.
This has had a negative impact on the consensus estimate, as the current year consensus estimate has declined by 2.6% over the past two months.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative trend indicates that analysts clearly have some apprehensions about the stock in the immediate future.
Bottom Line
Avis Budget is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 40% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks categorized Business Services 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.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>
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Is Avis Budget a Great Stock for Value Buying Right Now?
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 Avis Budget Group, Inc. (CAR - 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, Avis Budget has a trailing twelve months PE ratio of 10.93, 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 20.35. If we focus on the long-term PE trend, Avis Budget’s current PE level puts it below its midpoint over the past two years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Business Services industry’s trailing twelve months PE ratio, which stands at 20.62. At the very least, this indicates that the stock is largely undervalued right now, compared to its peers.
We should also point out that Avis Budget has a forward PE ratio (price relative to this year’s earnings) of 9.54, so it is fair to say that a slightly more value-oriented path may be ahead for Avis Budget 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, Avis Budget has a P/S ratio of about 0.33. This is considerably lower than the S&P 500 average, which comes in at 3.14 right now. Also, as we can see in the chart below, this is below the midpoint (which stands at 0.41) for this stock in particular over the past two years.
If anything, Avis Budget 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, Avis Budget 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 Avis Budget a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 1.03, which is far better than the industry average of 5.97. Clearly, Avis Budget is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Avis Budget 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 ‘F’. This gives Avis Budget 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 quite bearish. The current year has seen one upward and two downward estimate revisions in the past sixty days.
This has had a negative impact on the consensus estimate, as the current year consensus estimate has declined by 2.6% over the past two months.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Avis Budget Group, Inc. Price and Consensus
Avis Budget Group, Inc. Price and Consensus | Avis Budget Group, Inc. Quote
This negative trend indicates that analysts clearly have some apprehensions about the stock in the immediate future.
Bottom Line
Avis Budget is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 40% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks categorized Business Services 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.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>