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Is CRH Medical (CRHM) a Suitable Pick for Value Investors?

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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 CRH Medical Corporation 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, CRH Medical has a trailing twelve months PE ratio of 17. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.5.



If we focus on the long-term trend of the stock the current level puts CRH Medical’s current PE among its lowest territory, much below its median over the observed period (which stands at 40.5x). Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be an extremely suitable entry point for the stock from a PE perspective.


 
Further, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 38.8. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that CRH Medical has a forward PE ratio (price relative to this year’s earnings) of 12.1 – lower than the current level. So, it is fair to say that a more value-oriented path may be ahead for CRH Medical stock in the near term.

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, CRH Medical has a P/S ratio of about 2. This is lower than the industry average, which comes in at 2.8x right now.



If anything, CRHM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, CRH Medical currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes CRH Medical a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, P/B ratio (used to compare a stock's market value to its book value) for CRH Medical is just 1.7, a level that is far lower than the industry average of 3.5. Additionally, its P/CF ratio (another great indicator of values) comes in at 7.4, lower than the industry average of 17.6. Clearly, CRHM is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though CRH Medical 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 A and a Momentum score of F. This gives CRHM 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 earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days compared to none lower, while the full year estimate has also seen two upward revisions and two downward revisions in the same time period.

This has had no impact on the consensus estimate though as the current quarter and current year consensus estimate has remained stable over the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

CRH Medical Corporation Price and Consensus

Overall, the stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.

Bottom Line

CRH Medical is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, although boasting a good industry rank (among the top 36% out of more than 250 industries), the stock’s Zacks Rank #3 somewhat dims the sparkle.

So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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