We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
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 The Dow Chemical Company (DOW - 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, Dow Chemical has a trailing twelve months PE ratio of 17.12, 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 20.18. If we focus on the stock’s long-term PE trend, the current level puts Dow Chemical’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE is almost in line with the Zacks classified Computer Chemicals-Diversified industry’s trailing twelve months PE ratio, which stands at 17.14. This indicates that the stock is fairly valued right now, compared to its peers.
We should also point out that Dow Chemical has a forward PE ratio (price relative to this year’s earnings) of just 15.53, so it is fair to say that a slightly more value-oriented path may be ahead for Dow Chemical stock in the near term.
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, Dow Chemical has a P/S ratio of about 1.47. This is much lower than the S&P 500 average, which comes in at 3.06 right now. As we can see in the chart below, this is close to the highs for this stock in over the past few years, but remains significantly below the market at large. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Dow Chemical 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 Dow Chemical a solid choice for value investors.
What About the Stock Overall?
Though Dow Chemical 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 ‘B’. This gives DOW 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 rising. The current quarter estimates have been hiked and the full year has seen three estimates go higher in the past sixty days compared to one lower.
Consequently, the current quarter consensus estimate has risen by 5.4% in the past two months, while the full year estimate has increased by 2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite the strongly bullish trend, the stock has just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Bottom Line
Dow Chemical is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 29% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past year, the Zacks classified Chemicals-Diversified industry has clearly outperformed the broader market, as you can see below:
With a strong industry rank and bullish analyst sentiment, Dow Chemical looks like a strong value contender. So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Is Dow Chemical (DOW) a Good 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 The Dow Chemical Company (DOW - 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, Dow Chemical has a trailing twelve months PE ratio of 17.12, 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 20.18. If we focus on the stock’s long-term PE trend, the current level puts Dow Chemical’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE is almost in line with the Zacks classified Computer Chemicals-Diversified industry’s trailing twelve months PE ratio, which stands at 17.14. This indicates that the stock is fairly valued right now, compared to its peers.
We should also point out that Dow Chemical has a forward PE ratio (price relative to this year’s earnings) of just 15.53, so it is fair to say that a slightly more value-oriented path may be ahead for Dow Chemical stock in the near term.
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, Dow Chemical has a P/S ratio of about 1.47. This is much lower than the S&P 500 average, which comes in at 3.06 right now. As we can see in the chart below, this is close to the highs for this stock in over the past few years, but remains significantly below the market at large. This suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Dow Chemical 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 Dow Chemical a solid choice for value investors.
What About the Stock Overall?
Though Dow Chemical 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 ‘B’. This gives DOW 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 rising. The current quarter estimates have been hiked and the full year has seen three estimates go higher in the past sixty days compared to one lower.
Consequently, the current quarter consensus estimate has risen by 5.4% in the past two months, while the full year estimate has increased by 2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Dow Chemical Company (The) Price and Consensus
Dow Chemical Company (The) Price and Consensus | Dow Chemical Company (The) Quote
Despite the strongly bullish trend, the stock has just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Bottom Line
Dow Chemical is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 29% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past year, the Zacks classified Chemicals-Diversified industry has clearly outperformed the broader market, as you can see below:
With a strong industry rank and bullish analyst sentiment, Dow Chemical looks like a strong value contender. So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>