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 Popular, Inc. (BPOP - 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, Popular has a trailing twelve months PE ratio of 11.79, 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 20.36. If we focus on the stock’s long-term PE trend, the current level puts Popular’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 also compares favorably with the Zacks classified Banks - Southeast sector’s trailing twelve months PE ratio, which stands at 18.10. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Popular has a forward PE ratio (price relative to this year’s earnings) of just 11.10, so it is fair to say that a slightly more value-oriented path may be ahead for Popular 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, Popular has a P/S ratio of about 2.19. This is a bit lower than the S&P 500 average, which comes in at 3.16 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.
Broad Value Outlook
In aggregate, Popular 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 Popular a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) of Popular comes in at 7.16, which is significantly lower than the industry average of 11.84. Clearly, BPOP is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Popular 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 BPOP 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 favorable at the moment. Both the current quarter the full year estimate has seen one analyst moving north in the last two months.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has inched up by 1% in the past two months, while the full year estimate has increased just 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Popular is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, with a strong industry rank (among Top 32% of more than 250 industries) and a Zacks Rank #2, instills our confidence on the stock. In fact, over the past two years, the Zacks Banks – South east industry has clearly outpaced 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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