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Should Value Investors Consider Kuraray (KURRY) Now?

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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 Kuraray Co., Ltd. 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, Kuraray has a trailing twelve months PE ratio of 12.7, 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 20.4. If we focus on the long-term PE trend, the current level is significantly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.


Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 16.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that Kuraray has a forward PE ratio (price relative to this year’s earnings) of 12.3, so it is fair to say that a slightly more value-oriented path may be ahead for Kuraray 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, Kuraray has a P/S ratio of about 1.3. This is considerably lower than the S&P 500 average, which comes in at 3.3 right now.



If anything, this suggests some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

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

For example, the P/CF ratio (another great indicator of value) for Kuraray comes in at 7.5, which is far better than the industry average of 9.6.

What About the Stock Overall?

Though Kuraray 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 C. This gives KURRY 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 recent earnings estimates have been bullish. The current year has seen one estimate go higher in the past sixty days compared to none lower, while the next year estimate has seen one up and none up in the same time period.

This has had a noticeable impact on the consensus estimate though, as the current year consensus estimate has increased by 5.2% in the past two months, while the next year estimate has inched lower by 6.4%. This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

Kuraray is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 40%) instills investor confidence. In fact, over the past year, its 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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