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 Akzo Nobel N.V. ( AKZOY Quick Quote AKZOY - 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, Akzo Nobel has a trailing twelve months PE ratio of 18.66, 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 20.34. While Akzo Nobel’s current PE level puts it above its midpoint of 16.47 over the past five years, it stands below the highs for the stock, hinting at scope for entry. However, the stock’s PE stands about a notch higher than the Zacks classified Basic Materials sector’s trailing twelve months PE ratio, which stands at 17.57. This indicates that the stock slightly stretched right now, compared to its peers. We should also point out that Akzo Nobel’s forward PE is roughly same as its trailing twelve months value, so we might say that the forward earnings estimates are incorporated in the company’s share price as of now. We define forward PE as current price relative to the Zacks Consensus Estimate for the current fiscal year. 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, Akzo Nobel has a P/S ratio of about 1.42. This is quite lower than the S&P 500 average, which comes in at 3.16 right now, making the stock undervalued from this aspect too. Broad Value Outlook In aggregate, Akzo Nobel 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 Akzo Nobel a good choice for value investors. What About the Stock Overall? Though Akzo Nobel 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 ‘D’ and a Momentum score of ‘A’. This gives AKZOY a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>) Meanwhile, the company’s full year estimate has seen one upward with no downward revision in the past 60 days. This has had a meaningful impact on the consensus estimate, as the full year estimate has increased nearly 6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
However, this bullish trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. Nonetheless, the bullish analyst sentiment indicates that the stock’s prospects in the near term look good.
Bottom Line Akzo Nobel is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 12%, which indicates that broader factors are favorable for the company. Further, over the past one year, the Zacks categorized Chemicals – Diversified industry’s performance 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. Sell These Stocks. Now. Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks ""Strong Sells"" absolutely free >>.