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 Meritor 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, Meritor has a trailing twelve months PE ratio of 6.19, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.7. If we focus on the long-term PE trend, Meritor’ current PE level puts it below its midpoint of 8.9 over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Further, the stock’s PE also compares favorably with the Zacks Auto-Tires-Trucks sector’s trailing twelve months PE ratio, which stands at 9.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Meritor has a forward PE ratio (price relative to this year’s earnings) of just 6, so it is fair to say that a slightly more value-oriented path may be ahead for Meritor’ 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, Meritor has a P/S ratio of just 0.41. This is much lower than the S&P 500 average, which comes in at 3.23 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Meritor currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Meritor a solid choice for value investors.
Additionally, its P/CF ratio (another great indicator of value) comes in at 4.83, which is better than the industry average of 5.08. Clearly, MTOR is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Meritor 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 B and Momentum Score of A. This gives MTOR 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 encouraging. The current quarter has seen two upward revision in the past sixty days compared to two downward revisions, while the full year estimate has seen five upward revisions compared to no downward revision in the same time period.
As a result, the current quarter consensus estimate increased 2.4% in the past two months, while the full year estimate has increased by 5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Meritor, Inc. Price and Consensus
Notably, the stock with a solid earnings surprise history has a Zacks Rank #2 (Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Meritor is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, the company carries a sluggish industry rank (among Bottom 19% of more than 250 industries). In fact, over the past two years, the broader industry has underperformed the market at large as you can see below:
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So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a more 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 >>
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Is Meritor (MTOR) a Suitable Stock for Value Investors 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 Meritor 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, Meritor has a trailing twelve months PE ratio of 6.19, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.7. If we focus on the long-term PE trend, Meritor’ current PE level puts it below its midpoint of 8.9 over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Further, the stock’s PE also compares favorably with the Zacks Auto-Tires-Trucks sector’s trailing twelve months PE ratio, which stands at 9.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Meritor has a forward PE ratio (price relative to this year’s earnings) of just 6, so it is fair to say that a slightly more value-oriented path may be ahead for Meritor’ 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, Meritor has a P/S ratio of just 0.41. This is much lower than the S&P 500 average, which comes in at 3.23 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Meritor currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Meritor a solid choice for value investors.
Additionally, its P/CF ratio (another great indicator of value) comes in at 4.83, which is better than the industry average of 5.08. Clearly, MTOR is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Meritor 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 B and Momentum Score of A. This gives MTOR 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 encouraging. The current quarter has seen two upward revision in the past sixty days compared to two downward revisions, while the full year estimate has seen five upward revisions compared to no downward revision in the same time period.
As a result, the current quarter consensus estimate increased 2.4% in the past two months, while the full year estimate has increased by 5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Meritor, Inc. Price and Consensus
Meritor, Inc. Price and Consensus | Meritor, Inc. Quote
Notably, the stock with a solid earnings surprise history has a Zacks Rank #2 (Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Meritor is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, the company carries a sluggish industry rank (among Bottom 19% of more than 250 industries). In fact, over the past two years, the broader industry has underperformed the market at large as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a more 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 >>