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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 Chubb Limited (CB - 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, Chubb has a trailing twelve months PE ratio of 14.09. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.50.
If we focus on the long-term trend of the stock the current level puts Chubb’s current PE among its highs over the observed period. This suggests that the stock is overvalued compared to its own historical levels.
Further, the stock’s PE compares favorably with the Zacks classified Insurance – Property and Casualty industry’s trailing twelve months PE ratio, which stands at 21.31. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, Chubb has a P/S ratio of about 2.14. This is higher than the Zacks categorized Insurance – Property and Casualty industry average, which comes in at 1.74 right now.
CB is actually in 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.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Chubb’s P/CF ratio of 9.70 is much lower than the Zacks classified Insurance – Property and Casualty industry average of 13.04, which indicates that the stock is undervalued in this respect.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Chubb’s PEG ratio stands at just 1.41, compared with the Zacks Insurance – Property and Casualty industry average of 3.41. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Chubb 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 Chubb an apt choice for value investors, and all of the listed metrics make it pretty clear too.
What About the Stock Overall?
Though Chubb 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 ‘F’. This gives CB 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 recent earnings estimates have been trending downwards lately. The current quarter has seen four estimates go lower in the past sixty days compared to two higher, while the full year estimate has seen four downward revisions and two upward revisions in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has declined 2% in the past two months, while the full year estimate has inched lower by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish trend is why the stock has a Zacks Rank #4 (Sell) and why we fear that the company might disappoint in the near term.
Bottom Line
Chubb is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the Bottom 11% out of more than 250 industries) and a Zacks Rank #4, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks Insurance – Property and Casualty industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Should Value Investors Consider Chubb (CB) Stock?
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 Chubb Limited (CB - 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, Chubb has a trailing twelve months PE ratio of 14.09. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.50.
If we focus on the long-term trend of the stock the current level puts Chubb’s current PE among its highs over the observed period. This suggests that the stock is overvalued compared to its own historical levels.
Further, the stock’s PE compares favorably with the Zacks classified Insurance – Property and Casualty industry’s trailing twelve months PE ratio, which stands at 21.31. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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, Chubb has a P/S ratio of about 2.14. This is higher than the Zacks categorized Insurance – Property and Casualty industry average, which comes in at 1.74 right now.
CB is actually in 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.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Chubb’s P/CF ratio of 9.70 is much lower than the Zacks classified Insurance – Property and Casualty industry average of 13.04, which indicates that the stock is undervalued in this respect.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Chubb’s PEG ratio stands at just 1.41, compared with the Zacks Insurance – Property and Casualty industry average of 3.41. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Chubb 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 Chubb an apt choice for value investors, and all of the listed metrics make it pretty clear too.
What About the Stock Overall?
Though Chubb 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 ‘F’. This gives CB 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 recent earnings estimates have been trending downwards lately. The current quarter has seen four estimates go lower in the past sixty days compared to two higher, while the full year estimate has seen four downward revisions and two upward revisions in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has declined 2% in the past two months, while the full year estimate has inched lower by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
D/B/A Chubb Limited New Price and Consensus
D/B/A Chubb Limited New Price and Consensus | D/B/A Chubb Limited New Quote
This bearish trend is why the stock has a Zacks Rank #4 (Sell) and why we fear that the company might disappoint in the near term.
Bottom Line
Chubb is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the Bottom 11% out of more than 250 industries) and a Zacks Rank #4, it is hard to get too excited about this company overall.
In fact, over the past two years, the Zacks Insurance – Property and Casualty industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>