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Should Value Investors Pick AstraZeneca PLC (AZN) Stock?
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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 AstraZeneca PLC (AZN - 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, AstraZeneca PLC has a trailing twelve months PE ratio of 12.1, 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 compares in at about 17.4. If we focus on the stock’s long-term PE trend, the current level puts AstraZeneca PLC’s current PE ratio slightly above its midpoint (which is 9.8) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 15.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that AstraZeneca PLC has a forward PE ratio (price relative to this year’s earnings) of just 23.3, so it is fair to expect an increase in the company’s share price in the near future.
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, AstraZeneca PLC has a P/S ratio of about 2.4. This is noticeably lower than the S&P 500 average, which comes in at 3.2 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, AstraZeneca PLC currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes AZN a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for AstraZeneca PLC is just 1.2, a level that is considerably lower than the industry average of 2.1. 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 11.2, which is slightly better than the industry average of 11.5. Clearly, AZN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though AstraZeneca PLC 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 C. This gives AZN a 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 disappointing. The full-year 2019 has seen one estimate go higher in the past sixty days and one lower.
This has had a noticeable impact on the consensus estimate, as the full-year 2019 consensus estimate has dipped 0.6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite this somewhat bearish trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
AstraZeneca PLC is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (bottom 44% out of more than 250 industries). Nonetheless, over the past one year, the sector has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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Should Value Investors Pick AstraZeneca PLC (AZN) Stock?
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 AstraZeneca PLC (AZN - 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, AstraZeneca PLC has a trailing twelve months PE ratio of 12.1, 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 compares in at about 17.4. If we focus on the stock’s long-term PE trend, the current level puts AstraZeneca PLC’s current PE ratio slightly above its midpoint (which is 9.8) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 15.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that AstraZeneca PLC has a forward PE ratio (price relative to this year’s earnings) of just 23.3, so it is fair to expect an increase in the company’s share price in the near future.
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, AstraZeneca PLC has a P/S ratio of about 2.4. This is noticeably lower than the S&P 500 average, which comes in at 3.2 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, AstraZeneca PLC currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes AZN a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for AstraZeneca PLC is just 1.2, a level that is considerably lower than the industry average of 2.1. 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 11.2, which is slightly better than the industry average of 11.5. Clearly, AZN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though AstraZeneca PLC 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 C. This gives AZN a 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 disappointing. The full-year 2019 has seen one estimate go higher in the past sixty days and one lower.
This has had a noticeable impact on the consensus estimate, as the full-year 2019 consensus estimate has dipped 0.6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
AstraZeneca PLC Price and Consensus
AstraZeneca PLC Price and Consensus | AstraZeneca PLC Quote
Despite this somewhat bearish trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
AstraZeneca PLC is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (bottom 44% out of more than 250 industries). Nonetheless, over the past one year, the sector has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>