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 Pilgrim's Pride Corporation (PPC - 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, Pilgrim's Pride has a trailing twelve months PE ratio of 14.4, 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 19.8. While Pilgrim's Pride’s current PE level puts it above its midpoint over the past five years, the current level stands below the high for the stock, thus leaving some scope for entry.
Further, the stock’s PE compares favorably with the Zacks Consumer Staples sector’s trailing twelve months PE ratio, which stands at 25.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Pilgrim's Pride has a forward PE ratio (price relative to this year’s earnings) of just 11.83, so it is fair to say that a slightly more value-oriented path may be ahead for Pilgrim's Pride 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, Pilgrim's Pride has a P/S ratio of about 0.9. This is much lower than the S&P 500 average, which comes in at 3.1 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, Pilgrim's Pride 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 Pilgrim's Pride a solid choice for value investors.
What About the Stock Overall?
Though Pilgrim's Pride 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 and Momentum score of C, each. This gives PPC a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite encouraging, as both the current quarter and full year have seen one estimate go higher each, in the past sixty days compared to no downward revisions.
This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has risen by 10.9% in the past two months, while the full year estimate has increased 18.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Given these bullish trends, the stock boasts a Zacks Rank #1 (Strong Buy), which indicates why we are looking for outperformance from the company in the near term.
Pilgrim's Pride is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, the stock has a sluggish Zacks Industry Rank (Bottom 8% out of over 250 Zacks Industries). Also, over the past year, the industry has clearly underperformed the broader market, as you can see below:
Nevertheless, the company’s Zacks Rank #1, solid fundamentals and impressive value metrics indicate that this stock could be a compelling pick.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>