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 Outfront Media Inc. (OUT - 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, Outfront Media has a trailing twelve months PE ratio of 10.96, 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 20.13. If we focus on the stock’s long-term PE trend, the current level puts Outfront Media’s current PE ratio below 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 broader industry’s trailing twelve months PE ratio, which stands at 15.64. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Outfront Media has a forward PE ratio (price relative to this year’s earnings) of 11.09, which is tad higher than the current level. So it is fair to expect an increase in the company’s share price in the near term.
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, Outfront Media has a P/S ratio of about 2.06. This is significantly lower than the S&P 500 average, which comes in at 3.25 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.
If anything, OUT is towards the higher end of its range in the time period from a 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, Outfront Media 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 Outfront Media a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Outfront Media is just 1.94, a level that is far lower than the industry average of 2.87. 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 12.41, which is lower than the industry average of 15.42. Clearly, OUT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Outfront Media 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 ‘D’. This gives OUT 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 unfavorable. The current quarter estimates remained stable, while the full year estimate has seen three down in the last two months.
This has had just a small impact on the magnitude of consensus estimate though as the current quarter consensus estimate has decreased 1.7% in the past two months, while the full year estimate has inched lower by 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
OUTFRONT Media Inc. Price and Consensus
Despite the bearish analyst sentiments, the stock holds a Zacks Rank #3 (Hold). Thus, we are looking for in-line performance from the company in the near term.
Outfront Media is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a strong industry rank (among Top 46% of more than 250 industries) instills investor confidence. However, over the past two years, the broader industry has clearly underperformed the market in large, 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.
More Stock News: Tech Opportunity Worth $386 Billion in 2017
From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.
Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>