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 Envision Healthcare Corporation 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, Envision Healthcare has a trailing twelve months PE ratio of 16.7, 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 20.2. If we focus on the long-term PE trend, Envision Healthcare’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 22.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Envision Healthcare has a forward PE ratio (price relative to this year’s earnings) of just 12.7, so it is fair to say that a slightly more value-oriented path may be ahead for Envision Healthcare 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, Envision Healthcare has a P/S ratio of about 0.7. This is significantly lower than the S&P 500 average, which comes in at 3.5 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, EVHC is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Envision Healthcare 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 Envision Healthcare a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Envision Healthcare is 1.1, a level that is lower than the industry average of 2.2. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.4, which is far better than the industry average of 12.9. Clearly, EVHC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Envision Healthcare 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 D. This gives EVHC 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 estimates have been mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward and one downward revision in the same time period.
As a result, the current quarter consensus estimate has fallen by 4% in the past two months, while the full year estimate has inched lower by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting outperformance from the company in the near-term.
Bottom Line
Envision Healthcare is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 26%) and strong Zacks Rank, Envision Healthcare looks like a strong value contender. In fact, in the past year, the industry has clearly outperformed the broader market, as you can see below:
However, given the negative trend in earnings estimate revisions, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Envision Healthcare (EVHC) a Suitable Value Stock 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 Envision Healthcare Corporation 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, Envision Healthcare has a trailing twelve months PE ratio of 16.7, 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 20.2. If we focus on the long-term PE trend, Envision Healthcare’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 22.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Envision Healthcare has a forward PE ratio (price relative to this year’s earnings) of just 12.7, so it is fair to say that a slightly more value-oriented path may be ahead for Envision Healthcare 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, Envision Healthcare has a P/S ratio of about 0.7. This is significantly lower than the S&P 500 average, which comes in at 3.5 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, EVHC is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Envision Healthcare 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 Envision Healthcare a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Envision Healthcare is 1.1, a level that is lower than the industry average of 2.2. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.4, which is far better than the industry average of 12.9. Clearly, EVHC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Envision Healthcare 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 D. This gives EVHC 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 estimates have been mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward and one downward revision in the same time period.
As a result, the current quarter consensus estimate has fallen by 4% in the past two months, while the full year estimate has inched lower by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Envision Healthcare Corporation Price and Consensus
Envision Healthcare Corporation Price and Consensus | Envision Healthcare Corporation Quote
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting outperformance from the company in the near-term.
Bottom Line
Envision Healthcare is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 26%) and strong Zacks Rank, Envision Healthcare looks like a strong value contender. In fact, in the past year, the industry has clearly outperformed the broader market, as you can see below:
However, given the negative trend in earnings estimate revisions, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>