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 Lifepoint Health, 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, Lifepoint has a trailing twelve months PE ratio of 16.9, 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 20.4. If we focus on the stock’s long-term PE trend, the current level puts Lifepoint’s current PE ratio below its midpoint over the past five years, with the number having falling rapidly over the past few months.
However, the stock’s PE does not compare favorably with the Zacks classified Medical – Hospital industry’s trailing twelve months PE ratio, which stands at 14.8. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Lifepoint has a forward PE ratio (price relative to this year’s earnings) of just 14.6, so it is fair to say that a slightly more value-oriented path may be ahead for Lifepoint stock in the near term.
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, Lifepoint’s P/CF ratio of 5.2 is lower than the Zacks classified Medical – Hospital industry average of 6.4, which indicates that the stock is fairly undervalued in this respect.
Broad Value Outlook
In aggregate, Lifepoint 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 Lifepoint a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the Price/Sales (P/S) ratio for Lifepoint is just 0.37, a level that is lower than the industry average of 0.72. The P/S ratio compares a given stock’s price to its total sales, where a lower reading is generally considered better. Clearly, LPNT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lifepoint 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 ‘D’. This gives LPNT 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 positive. The current quarter has seen two estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen six up and three down in the same time period.
The trend has had a mixed impact on the estimates as the current quarter consensus estimate has dropped by 1.9% in the past two months, while the full year estimate has risen by 1.2%. You can see the consensus estimate trend and recent price actionfor the stock in the chart below:
This somewhat mixed 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
Lifepoint 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 18%) 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 Medical – Hospital 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.
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Is Lifepoint Health a Suitable 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 Lifepoint Health, 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, Lifepoint has a trailing twelve months PE ratio of 16.9, 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 20.4. If we focus on the stock’s long-term PE trend, the current level puts Lifepoint’s current PE ratio below its midpoint over the past five years, with the number having falling rapidly over the past few months.
However, the stock’s PE does not compare favorably with the Zacks classified Medical – Hospital industry’s trailing twelve months PE ratio, which stands at 14.8. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Lifepoint has a forward PE ratio (price relative to this year’s earnings) of just 14.6, so it is fair to say that a slightly more value-oriented path may be ahead for Lifepoint stock in the near term.
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, Lifepoint’s P/CF ratio of 5.2 is lower than the Zacks classified Medical – Hospital industry average of 6.4, which indicates that the stock is fairly undervalued in this respect.
Broad Value Outlook
In aggregate, Lifepoint 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 Lifepoint a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the Price/Sales (P/S) ratio for Lifepoint is just 0.37, a level that is lower than the industry average of 0.72. The P/S ratio compares a given stock’s price to its total sales, where a lower reading is generally considered better. Clearly, LPNT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lifepoint 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 ‘D’. This gives LPNT 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 positive. The current quarter has seen two estimates going higher in the past sixty days compared to one lower, while the full year estimate has seen six up and three down in the same time period.
The trend has had a mixed impact on the estimates as the current quarter consensus estimate has dropped by 1.9% in the past two months, while the full year estimate has risen by 1.2%. You can see the consensus estimate trend and recent price actionfor the stock in the chart below:
LifePoint Health, Inc. Price and Consensus
LifePoint Health, Inc. Price and Consensus | LifePoint Health, Inc. Quote
This somewhat mixed 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
Lifepoint 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 18%) 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 Medical – Hospital 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.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>