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 Boise Cascade Company (BCC - 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, Boise Cascade has a trailing twelve months PE ratio of 16.8, 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. If we focus on the long-term PE trend, Boise Cascade’s current PE level puts it below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with its industry trailing twelve months PE ratio, which stands at 21.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Boise Cascade has a forward PE ratio (price relative to this year’s earnings) of 13.1, so it is fair to say that a slightly more value-oriented path may be ahead for the 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, BCC has a P/S ratio of about 0.4. This is 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, Boise Cascade currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Boise Cascade a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 10.7, which is far better than the industry average of 12. Clearly, BCC is a good choice on the value front from multiple angles.
What About the Stock Overall?
Though Boise Cascade 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 D and a Momentum score of B. This gives BCC 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 estimate has been encouraging. The current quarter has seen two upward and none downward estimate revisions in the past 30 days, while the current year has seen three upward and none downward estimate revision in the same time frame.
As a result, the current quarter consensus estimate has moved up by 26.6% in the past one month, while the current year estimate has inched higher by 25.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Boise Cascade, L.L.C. Price and Consensus
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Boise Cascade is an inspired choice for value investors, as it is hard to beat its good lineup of statistics on this front. Further, the stock belongs to an industry which is ranked among the top 5% (out of more than 250 industries), indicating that broader factors are favorable for the company. Moreover, over the past six months, its industry 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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