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 Brunswick Corporation (BC - 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, Brunswick Corporation has a trailing twelve months PE ratio of 17.3, 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, Brunswick Corporation’s current PE is well below its highs over the past five years.
Further, the stock’s PE compares favorably with the industry’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Brunswick Corporation has a forward PE ratio (price relative to this year’s earnings) of 14.8, so it is fair to say that a slightly more value-oriented path may be ahead for Brunswick 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, Brunswick Corporation has a P/S ratio of about 1.3. This is much lower than the S&P 500 average, which comes in at 3.4 right now. This makes the stock undervalued from the P/S aspect too.
Broad Value Outlook
In aggregate, Brunswick Corporation currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Brunswick Corporation 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 13.4, is far better than the industry average of 19.5. Clearly, BC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
While Brunswick 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 D and a Momentum Score of D. This gives BC 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 encouraging. The current year has seen eight estimates go higher in the past sixty days compared to one downward revisions, while the next year estimate has seen five upward and two downward revision in the same time period.
As a result, the current year consensus estimate has increased by 0.7% in the past two months, while the next year estimate has inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Brunswick Corporation Price and Consensus
Even though Brunswick Corporation has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Brunswick Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 12% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past year, the 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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