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 Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - 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:
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, Banco Bilbao has a trailing twelve months PE ratio of 13.23, 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 20.18. If we focus on the long-term PE trend, Banco Bilbao’s current PE level puts it slightly below its midpoint of 14.17 over the past five years. Moreover, the current level stands way below the highs for the stock, suggesting that it could be a superb entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 15.41. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Banco Bilbao has a forward PE ratio (price relative to this year’s earnings) of just 11.87, so it is fair to say that a slightly more value-oriented path may be ahead for Banco Bilbao stock in the near term too.
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, Banco Bilbao has a P/S ratio of about 2.05. This is a bit lower than the S&P 500 average, which comes in at 3.06 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Banco Bilbao 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 Banco Bilbao a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, Banco Bilbao’s P/CF ratio (another great indicator of value) comes in at 2.13, which is far better than the industry average of 5.79. Clearly, BBVA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Banco Bilbao 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 BBVA a Zacks VGM score—or its overarching fundamental grade—of ‘B.’ (You can read more about the Zacks Style Scores here >>)
Notably, the company’s recent earnings estimates have been somewhat encouraging, as the full year has seen one estimate go higher in the past sixty days compared to no downward revisions.
This has had a positive impact on the consensus estimate, as the full year estimate has increased 5.1% in the last two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Banco Bilbao is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Along with a solid Zacks Rank, the company flaunts a strong industry rank (Top 23% out of over 250 industries) as well. This indicates that the broader factors are also favorable for the company. In fact, over the past one year, the Zacks classified Banks – Foreign industry has outperformed the broader market, as you can see below:
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.
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