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 Cambrex 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, Cambrex has a trailing twelve months PE ratio of 18.40, 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 20.53. If we focus on the long-term PE trend, Cambrex’s current PE level puts it below its midpoint over the past five years.



Further, the stock’s PE also compares favorably with the Zacks classified Medical-Biomedical/Genetics industry’s trailing twelve months PE ratio, which stands at 29.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.


 
We should also point out that Cambrex has a forward PE ratio (price relative to this year’s earnings) of just 16.64, so it is fair to say that a slightly more value-oriented path may be ahead for Cambrex stock in the near term too.

PEG Ratio

While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.

Cambrex’s PEG ratio stands at just 1.09, compared with the Zacks Medical-Biomedical/Genetics industry average of 2.67. This suggests a decent undervalued trading relative to its earnings growth potential right now.



Broad Value Outlook

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

For example, Cambrex has a P/S ratio of about 3.06 which is considerably lower than the S&P 500 average, which comes in at 14.75 right now. P/S ratio compares a given stock’s price to its total sales, where a lower reading is considered better. Additionally, its P/CF ratio (another great indicator of value) comes in at 44.30, while the industry’s average stands at a negative 4.11. Thus, while the industry is experiencing negative cash flows, Cambrex’s financial health seems much better.

What About the Stock Overall?

Though Cambrex 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 ‘F’ and a Momentum score of ‘A’. This gives CBM 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 encouraging. The current quarter consensus estimate has moved up 2% in the past one month, while the full year estimate has inched higher by 2.3% . You can see the consensus estimate trend and recent price action for the stock in the chart below:

Cambrex Corporation Price and Consensus

Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.

Bottom Line

Cambrex is an inspired choice for value investors, as it is hard to beat its good lineup of statistics on this front. However, with a sluggish industry rank (Bottom 41% 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 one year, the Zacks Medical-Biomedical/Genetics industry has underperformed the broader market, as you can see below:



So, value investors might want to wait for broader factors to turn favorable in this name first, but once that happen, this stock could be a compelling pick.

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