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 Culp, 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, Culp Inc. has a trailing twelve months PE ratio of 16.83. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.49.
If we focus on the long-term trend of the stock the current level puts Interface’s current PE towards its highs over the past five years. This suggests that the stock is overvalued compared to its own historical levels and thus it would be prudent to wait for a more suitable entry point to emerge.
Further, the stock’s PE compares favorably with the Zacks classified Textile - Home Furnishing industry’s trailing twelve months PE ratio, which stands at 17.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has been undervalued compared to its peers over most of the observed period.
PS 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, Culp Inc. has a P/S ratio of about 1.34. This is lower than the Zacks categorized Textile - Home Furnishing industry average, which comes in at 1.55 right now.
Notably, CFI is actually towards the higher zone of its trading range in the time period per the 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, Culp Inc. 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 Culp Inc. a solid choice for value investors.
What About the Stock Overall?
Though Culp Inc. 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 CFI 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 trending downwards lately. The current quarter has seen three estimates go lower in the past thirty days compared to none higher, while the full year estimate has seen three downward revisions and no upward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has decreased 11.8% over the past month, while the full year estimate has inched lower by 3%.
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Culp Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a decent industry rank (Top 41% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, a positive housing market outlook and an increasing consumer spending expectation bode well for the industry. The Textile - Home Furnishing industry has outperformed the broader market over the last two years also, as you can see below:
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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. Moreover, broader factors at the industry level support the growth potential of the company as well.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Will Culp Inc. (CFI) Prove to be an Appropriate Value Pick?
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 Culp, 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, Culp Inc. has a trailing twelve months PE ratio of 16.83. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.49.
If we focus on the long-term trend of the stock the current level puts Interface’s current PE towards its highs over the past five years. This suggests that the stock is overvalued compared to its own historical levels and thus it would be prudent to wait for a more suitable entry point to emerge.
Further, the stock’s PE compares favorably with the Zacks classified Textile - Home Furnishing industry’s trailing twelve months PE ratio, which stands at 17.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has been undervalued compared to its peers over most of the observed period.
PS 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, Culp Inc. has a P/S ratio of about 1.34. This is lower than the Zacks categorized Textile - Home Furnishing industry average, which comes in at 1.55 right now.
Notably, CFI is actually towards the higher zone of its trading range in the time period per the 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, Culp Inc. 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 Culp Inc. a solid choice for value investors.
What About the Stock Overall?
Though Culp Inc. 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 CFI 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 trending downwards lately. The current quarter has seen three estimates go lower in the past thirty days compared to none higher, while the full year estimate has seen three downward revisions and no upward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has decreased 11.8% over the past month, while the full year estimate has inched lower by 3%.
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Culp Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a decent industry rank (Top 41% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.
Notably, a positive housing market outlook and an increasing consumer spending expectation bode well for the industry. The Textile - Home Furnishing industry has outperformed the broader market over the last two years also, 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. Moreover, broader factors at the industry level support the growth potential of the company as well.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>