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 DST Systems, 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, DST Systems has a trailing twelve months PE ratio of 19.48. This level compares somewhat favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.27.
If we focus on the long-term trend of the stock the current level puts United Rentals’ current PE slightly above its median (which stands at 18.25) over the observed period. Also, the current level is below the highs experienced for the stock.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Computer – Software industry’s trailing twelve months PE ratio, which stands at 26.39. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has been mostly undervalued compared to its peers since mid-2014.
We should also point out that DST Systems has a forward PE ratio (price relative to this year’s earnings) of just 18.70 – lower than the current level. So it is fair to say that a slightly more value-oriented path may be ahead for DST Systems stock in the near term too.
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, DST Systems has a P/S ratio of about 2.53. This is much lower than the Zacks categorized Computer – Software industry average, which comes in at 5.17 right now.
Notably, DST is actually towards the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, DST Systems 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 DST Systems a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for DST Systems is just 1.87, a level that is lower than the industry average of 2.42. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 12.91, which is far better than the industry average of 13.97. Clearly, DST is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though DST Systems 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 ‘B’. This gives DST a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen one estimate go higher in the past thirty days compared to one lower, while the full year estimate has seen three upward revisions and no downward revision in the same time period.
This has had a small but meaningful impact on the consensus estimate, as the current quarter consensus estimate has inched higher by 1.2% in the past month, while the full year estimate has moved north by nearly 5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
DST Systems, Inc. Price and Consensus
This positive trend signifies bullish analyst sentiment, and the company’s Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
DST Systems is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a strong industry rank (among the Top 40% out of more than 250 industries) and top Zacks Rank, DST Systems looks like a strong value contender. In fact, over the past two years, the Zacks Computer – Software industry has clearly outperformed the broader market, as you can see below:
Additionally, the company’s focus on returning wealth to shareholders through consistent dividend payments and share buybacks, poises it stoutly as a strong potential investment. 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.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>
Image: Bigstock
Will DST Systems (DST) Prove to be a Suitable 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 DST Systems, 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, DST Systems has a trailing twelve months PE ratio of 19.48. This level compares somewhat favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.27.
If we focus on the long-term trend of the stock the current level puts United Rentals’ current PE slightly above its median (which stands at 18.25) over the observed period. Also, the current level is below the highs experienced for the stock.
Further, the stock’s PE also compares considerably favorably with the Zacks classified Computer – Software industry’s trailing twelve months PE ratio, which stands at 26.39. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, the stock has been mostly undervalued compared to its peers since mid-2014.
We should also point out that DST Systems has a forward PE ratio (price relative to this year’s earnings) of just 18.70 – lower than the current level. So it is fair to say that a slightly more value-oriented path may be ahead for DST Systems stock in the near term too.
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, DST Systems has a P/S ratio of about 2.53. This is much lower than the Zacks categorized Computer – Software industry average, which comes in at 5.17 right now.
Notably, DST is actually towards the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, DST Systems 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 DST Systems a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for DST Systems is just 1.87, a level that is lower than the industry average of 2.42. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 12.91, which is far better than the industry average of 13.97. Clearly, DST is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though DST Systems 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 ‘B’. This gives DST a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen one estimate go higher in the past thirty days compared to one lower, while the full year estimate has seen three upward revisions and no downward revision in the same time period.
This has had a small but meaningful impact on the consensus estimate, as the current quarter consensus estimate has inched higher by 1.2% in the past month, while the full year estimate has moved north by nearly 5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
DST Systems, Inc. Price and Consensus
DST Systems, Inc. Price and Consensus | DST Systems, Inc. Quote
This positive trend signifies bullish analyst sentiment, and the company’s Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
DST Systems is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a strong industry rank (among the Top 40% out of more than 250 industries) and top Zacks Rank, DST Systems looks like a strong value contender. In fact, over the past two years, the Zacks Computer – Software industry has clearly outperformed the broader market, as you can see below:
Additionally, the company’s focus on returning wealth to shareholders through consistent dividend payments and share buybacks, poises it stoutly as a strong potential investment. 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.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>