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 Huntsman Corporation (HUN - 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, Huntsman Corporation has a trailing twelve months PE ratio of 13. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.7.
If we focus on the long-term trend of the stock the current level puts Huntsman Corporation’s current PE above its median over the observed period (which stands at 11.5x). Hence, we could infer that the stock is overvalued in this respect, especially in light of its historical trend.
Nevertheless, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 17.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Huntsman Corporation has a forward PE ratio (price relative to this year’s earnings) of 12.2 – lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Huntsman Corporation stock 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, Huntsman Corporation has a P/S ratio of about 0.7. This is much lower than the industry average, which comes in at 1.7x right now.
HUN 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, Huntsman Corporation currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Huntsman Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Huntsman Corporation is 1.7, a level that is lower than the industry average of 2. 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 7.1, which is far better than the industry average of 11.6. Clearly, HUN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Huntsman Corporation 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 D. This gives HUN 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 recent earnings estimates have been trending upward lately. The current quarter has seen three estimates go higher in the past thirty days compared to none lower, while the full year estimate has seen three upward revisions and no downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate jumped 16.3% in the past month, while the full year estimate increased 2.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Huntsman Corporation 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.
Huntsman Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a favorable industry rank (among the top 24% out of more than 250 industries) and a top Zacks Rank, the company deserves attention right now.
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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