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Is Stepan Company (SCL) Stock a Suitable Value Pick 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 Stepan Company (SCL - 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, Stepan has a trailing twelve months PE ratio of 17.8, 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 20.1. If we focus on the long-term PE trend, Stepan’s current PE level puts it slightly above its midpoint over the past five years.
However, the stock’s PE compares slightly unfavorably with the industry’s trailing twelve months PE ratio, which stands at 16.4. This indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should point out that Stepan has a forward PE ratio (price relative to this year’s earnings) of just 16.1, so it is fair to say that a slight value-oriented path may be ahead for Stepan 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, Stepan has a P/S ratio of about 1.0. This is lower than the S&P 500 average, which comes in at 3.2 right now. As we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
SCL 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, Stepan 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 Stepan a solid choice for value investors.
What About the Stock Overall?
Though Stepan 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 SCL 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 trending higher. The current quarter as well as the full year has seen two estimates go higher in the past sixty days compared to none lower.
As a result, the current quarter consensus estimate has risen by 16.7% in the past two months, while the full year estimate has increased 10%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Stepan is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (among the top 19%) and a top Zacks Rank, the company deserves attention right now. In fact, over the past two years, the industry has marginally 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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Is Stepan Company (SCL) Stock a Suitable Value Pick Now?
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 Stepan Company (SCL - 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, Stepan has a trailing twelve months PE ratio of 17.8, 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 20.1. If we focus on the long-term PE trend, Stepan’s current PE level puts it slightly above its midpoint over the past five years.
However, the stock’s PE compares slightly unfavorably with the industry’s trailing twelve months PE ratio, which stands at 16.4. This indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should point out that Stepan has a forward PE ratio (price relative to this year’s earnings) of just 16.1, so it is fair to say that a slight value-oriented path may be ahead for Stepan 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, Stepan has a P/S ratio of about 1.0. This is lower than the S&P 500 average, which comes in at 3.2 right now. As we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
SCL 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, Stepan 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 Stepan a solid choice for value investors.
What About the Stock Overall?
Though Stepan 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 SCL 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 trending higher. The current quarter as well as the full year has seen two estimates go higher in the past sixty days compared to none lower.
As a result, the current quarter consensus estimate has risen by 16.7% in the past two months, while the full year estimate has increased 10%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Stepan Company Price and Consensus
Stepan Company Price and Consensus | Stepan Company Quote
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Stepan is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (among the top 19%) and a top Zacks Rank, the company deserves attention right now. In fact, over the past two years, the industry has marginally 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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>