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 Vitamin Shoppe, 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, Vitamin Shoppe has a trailing twelve months PE ratio of 9.23, as you can see in the chart below:
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This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.33. If we focus on the stock’s long-term PE trend, the current level puts Vitamin Shoppe’s current PE ratio much below its midpoint over the past five years, with the number having fallen over the past few months.
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Further, the stock’s PE also compares favorably with the Zacks classified Food Items – Wholesale industry’s trailing twelve months PE ratio, which stands at 19.43. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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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, Vitamin Shoppe has a P/S ratio of about 0.35. This is much lower than the S&P 500 average, which comes in at 3.08 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.
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If anything, VSI 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.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Vitamin Shoppe’s P/CF ratio of 4.43 is lower than the Zacks classified Food Items - Wholesale industry average of 11.79, which indicates that the stock is undervalued in this respect too.
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Broad Value Outlook
In aggregate, Vitamin Shoppe 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 Vitamin Shoppe a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Vitamin Shoppe is just 0.87, a level that is far lower than the industry average of 1.69. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, VSI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Vitamin Shoppe 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 ‘D’. This gives VSI a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been declining. The current quarter has seen no estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen none up and six down in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has fallen by 17.5% in the past two months, while the full year estimate has declined by 8.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Vitamin Shoppe 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 25% compared to over 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 Food Items - Wholesale industry has clearly underperformed the broader market, 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.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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Image: Bigstock
Is Vitamin Shoppe (VSI) 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 Vitamin Shoppe, 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, Vitamin Shoppe has a trailing twelve months PE ratio of 9.23, 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 20.33. If we focus on the stock’s long-term PE trend, the current level puts Vitamin Shoppe’s current PE ratio much below its midpoint over the past five years, with the number having fallen over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Food Items – Wholesale industry’s trailing twelve months PE ratio, which stands at 19.43. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, Vitamin Shoppe has a P/S ratio of about 0.35. This is much lower than the S&P 500 average, which comes in at 3.08 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, VSI 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.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Vitamin Shoppe’s P/CF ratio of 4.43 is lower than the Zacks classified Food Items - Wholesale industry average of 11.79, which indicates that the stock is undervalued in this respect too.
Broad Value Outlook
In aggregate, Vitamin Shoppe 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 Vitamin Shoppe a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Vitamin Shoppe is just 0.87, a level that is far lower than the industry average of 1.69. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, VSI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Vitamin Shoppe 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 ‘D’. This gives VSI a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been declining. The current quarter has seen no estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen none up and six down in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has fallen by 17.5% in the past two months, while the full year estimate has declined by 8.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Vitamin Shoppe, Inc Price and Consensus
Vitamin Shoppe, Inc Price and Consensus | Vitamin Shoppe, Inc Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Vitamin Shoppe 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 25% compared to over 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 Food Items - Wholesale 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.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.Click to see them right now >>