We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Henkel (HENKY) Make a Suitable Value Pick Right Now?
Read MoreHide Full Article
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 Henkel AG & Co. KGaA (HENKY - 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, Henkel has a trailing twelve months PE ratio of 19.40, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 compares in at about 20.00. If we focus on the stock’s long-term PE trend, the current level puts Henkel’s current PE ratio above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 20.54. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Henkel has a forward PE ratio (price relative to this year’s earnings) of 17.46, so it is fair to say that a slightly more value-oriented path may be ahead for Henkel stock in the near term too.
P/S 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, Henkel has a P/S ratio of 2.40. This is lower than the S&P 500 average, which comes in at 3.13 right now.
If anything, HENKY this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Henkel currently has a Zacks Value Style Score of ‘B’, putting it into the top 20% of all stocks we cover from this look. This makes Henkel a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Henkel is just 2.16, a level that is lower than the industry average of 2.58. 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 11.85, which is substantially better than the industry average of 16.89. Clearly, Henkel is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Henkel 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 Henkel 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 discouraging. The current year and next has seen no upward estimate revision in the past thirty days, compared to one downward.
This has had a noticeable impact on the consensus estimate, as the current year consensus estimate has fallen by about 1% in the past one month, while the next year estimate is down 3.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Henkel is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a decent industry rank (top 14% out of more than 250 industries), a Zacks Rank #3, makes it hard to get too excited about this company overall. Again, over the past one year, its industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
One Simple Trading Idea
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.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today. Learn more >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Will Henkel (HENKY) Make a Suitable Value Pick Right Now?
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 Henkel AG & Co. KGaA (HENKY - 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, Henkel has a trailing twelve months PE ratio of 19.40, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 compares in at about 20.00. If we focus on the stock’s long-term PE trend, the current level puts Henkel’s current PE ratio above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 20.54. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Henkel has a forward PE ratio (price relative to this year’s earnings) of 17.46, so it is fair to say that a slightly more value-oriented path may be ahead for Henkel stock in the near term too.
P/S 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, Henkel has a P/S ratio of 2.40. This is lower than the S&P 500 average, which comes in at 3.13 right now.
If anything, HENKY this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Henkel currently has a Zacks Value Style Score of ‘B’, putting it into the top 20% of all stocks we cover from this look. This makes Henkel a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Henkel is just 2.16, a level that is lower than the industry average of 2.58. 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 11.85, which is substantially better than the industry average of 16.89. Clearly, Henkel is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Henkel 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 Henkel 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 discouraging. The current year and next has seen no upward estimate revision in the past thirty days, compared to one downward.
This has had a noticeable impact on the consensus estimate, as the current year consensus estimate has fallen by about 1% in the past one month, while the next year estimate is down 3.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Henkel AG & Co. Price and Consensus
Henkel AG & Co. Price and Consensus | Henkel AG & Co. Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Henkel is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a decent industry rank (top 14% out of more than 250 industries), a Zacks Rank #3, makes it hard to get too excited about this company overall. Again, over the past one year, its industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
One Simple Trading Idea
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.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>