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 Nissan Motor Co. (NSANY Quick QuoteNSANY - 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, Nissan has a trailing twelve months PE ratio of 7.47. This level compares highly favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.18.

If we focus on the long-term trend of the stock the current level puts Nissan’s current PE near its lows as it is well below its median for the term (which stands at 9.49). Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.

Further, the stock’s PE also compares favorably with the Zacks classified Automotive - Foreign industry’s trailing twelve months PE ratio, which stands at 10.35. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

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, Nissan has a P/S ratio of about 0.37. This is lower than the Zacks categorized Automotive - Foreign industry average, which comes in at 0.50 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.

 
This clearly suggests some level of undervalued trading for NSANY—at least compared to historical norms.

Broad Value Outlook

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

For example, its P/CF ratio (another great indicator of value) comes in at just 5.69, which is better than the industry average of 5.74. Additionally, its P/B ratio (used to compare a stock's market value to its book value) stands at 0.94, lower than the industry average of 1.08. Clearly, NSANY is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Nissan 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 NSANY a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Nissan seems to have pretty striking prospects.

However, the company’s recent earnings estimates have been trending down lately. The current quarter has seen one estimate go lower in the past thirty days compared to none higher, while the full year estimate has seen two downward revisions and no upward revision in the same time period.

This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has moved south by 4.5% in the past month, while the full year estimate has inched lower by 1.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Nissan Motor Co. Price and Consensus

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

Nissan 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 formidable industry rank (Top 11% out of more than 250 industries), the company’s Zacks Rank #3 somewhat dims the sparkle.

Nevertheless, the company’s focus on returning wealth to shareholders through consistent dividend payments poises it stoutly as a strong potential investment.

So, value investors might want to wait for analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.

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