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 TELUS Corporation (TU - 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, TELUS Corporation has a trailing twelve months PE ratio of 18.77, 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 21.97. If we focus on the long-term PE trend, TELUS Corporation’s current PE level puts it above its midpoint of 16.55 over the past five years, with the number having risen rapidly over the past few months.
However, the stock’s PE compares stands slightly above the Zacks Utilities sector’s trailing twelve months PE ratio of 21.2. This indicates that the stock is a bit overvalued right now, compared to its peers.
Nonetheless, we should also point out that TELUS Corporation has a forward PE ratio (price relative to this year’s earnings) of just 16.79, so it is fair to say that a slightly more value-oriented path may be ahead for TELUS Corporation 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, TELUS Corporation has a P/S ratio of about 2.23. This is lower than the S&P 500 average, which comes in at 3.48 right now. This makes the stock undervalued from the P/S aspect too.
Broad Value Outlook
In aggregate, TELUS Corporation currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes TELUS Corporation a solid choice for value investors.
What About the Stock Overall?
Though TELUS 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 Score of B and a Momentum Score of C. This gives TU 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 not witnessed any revisions in the past 30 days. Thus, the current quarter and full year consensus estimates have remained unchanged over the past month. You can see the consensus estimate trend and recent price action for the stock in the chart below:
TELUS Corporation Price and Consensus