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Should Value Investors Consider Triumph Group (TGI) Stock?

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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 Triumph Group, Inc. (TGI - 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, Triumph Group has a trailing twelve months PE ratio of 6.17, 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 20.80. If we focus on the long-term PE trend, Triumph Group’s current PE level puts it below its midpoint of 10.8 over the past five years. Moreover, the current level stands well below the highs for the stock, indicating that it could be a great entry point.



Further, the stock’s PE compares favorably with the Zacks Aerospace sector’s trailing twelve months PE ratio, which stands at 23.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
 


We should point out that Triumph Group has a forward PE ratio (price relative to this year’s earnings) of just 12.19, so it is fair to expect an increase in the company’s share price in the near future.

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, Triumph Group has a P/S ratio of about 0.45. This is much lower than the S&P 500 average, which comes in at 3.29 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, Triumph Group currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Triumph Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Triumph Group is just 0.74, a level that is far lower than the industry average of 2.24. 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 2.30, which is far better than the industry average of 15.93. Clearly, TGI is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Triumph Group 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 Score and Momentum Score of F, each. This gives TGI 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 quite encouraging. Both, the current quarter and full year have seen four estimates go higher in the past thirty days compared to two downward revisions.

This has had a positive impact on the consensus estimate, as the current quarter consensus estimate has jumped 26.4% in the past month, while the full year estimate has increased 20.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Triumph Group, Inc. Price and Consensus
 

Triumph Group, Inc. Price and Consensus | Triumph Group, Inc. Quote

However, this somewhat bullish trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. Nonetheless, the bullish analyst sentiment indicates that the stock’s prospects in the near term look good.

Bottom Line

Triumph Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 39%, which indicates that broader factors are favorable for the company. Further, over the past two years, the industry has 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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