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 Worthington Industries, Inc. (WOR - 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, Worthington Industries has a trailing twelve months PE ratio of 15.89. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.89.
If we focus on the long-term trend of the stock the current level puts Worthington Industries’ current PE near its median over the observed period. Notably, the current level is much below the highs experienced over the period suggesting some level of undervalued trading, especially in light of its historical trend.
Further, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 23.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Worthington Industries has a forward PE ratio (price relative to this year’s earnings) of just 14.73, so it is fair to say that a slightly more value-oriented path may be ahead for Worthington Industries 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, Worthington Industries has a P/S ratio of about 1.07. This is higher than the industry average, which comes in at 0.78x right now.
WOR 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.
Broad Value Outlook
In aggregate, Worthington Industries currently has a Value Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Worthington Industries an apt choice for value investors, and all the above listed metrics make this pretty clear too.
What About the Stock Overall?
Though Worthington Industries 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 ‘B’ and a Momentum score of ‘F’. This gives WOR 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 earnings estimates have been trending upward lately. The current year has seen three estimates go higher in the past sixty days compared to none lower, while the next year estimate has seen one upward revision and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current year consensus estimate has increased 11.9% over the past two months, while the next year estimate has moved up 10.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Worthington Industries, Inc. Price and Consensus
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Worthington Industries is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 33% out of more than 250 industries) and strong Zacks Rank, Worthington Industries looks like a strong value contender. In fact, over the past two years, the industry has clearly 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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