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 Qurate Retail Group, Inc. (QRTEA - 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, Qurate Retail has a trailing twelve months PE ratio of 6.3, 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 20.3. If we focus on the long-term PE trend, Qurate Retail current PE level puts it below its midpoint of over the past five years.
Further, the stock’s PE compares favorably with the industry’s trailing twelve months PE ratio, which stands at 72.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Qurate Retail has a forward PE ratio (price relative to this year’s earnings) of just 9.9, so it is fair to expect an increase in the company’s share price in the near future.
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, Qurate Retail has a P/S ratio of about 0.9. 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 as well.
Broad Value Outlook
In aggregate, Qurate Retail currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Qurate Retail a solid choice for value investors.
What About the Stock Overall?
Though Qurate Retail 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 C and a Momentum Score of B. This gives QRTEA 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 quite discouraging. The current year has seen one estimates go higher in the past thirty days compared to three downward revision, while the next year estimate has seen none upward and three downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate, as the current year consensus estimate has dropped 23.5% in the past two months, while the next year estimate has decreased 12.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Qurate Retail Group, Inc. Price and Consensus
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Qurate Retail is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, the stock possesses a solid Zacks Industry Rank (among top 34% of more than 250 industries).
So, value investors might want to wait for estimates and analyst sentiment to turn favorable in this name first, but once that happen, this stock could be a compelling pick.
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