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Is Lloyds Banking Group (LYG) a Good Value Investor Pick?
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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 Lloyds Banking Group (LYG - 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, Lloyds Banking Group has a trailing twelve months PE ratio of 2.31, 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 17.8. If we focus on the long-term PE trend, Lloyds Banking Group’s current PE level puts it well below its midpoint of 9.57 over the past five years, with the number having risen rapidly over the past few months. However, 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 Finance Market sector’s trailing twelve months PE ratio, which stands at 13.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lloyds Banking Group has a forward PE ratio (price relative to this year’s earnings) of 6.78, 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, Lloyds Banking Group has a P/S ratio of 2.14. This is much 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 considerably below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Lloyds Banking Group currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lloyds Banking Group a solid choice for value investors.
Its P/CF ratio (another great indicator of value) comes in at 6.05, which is better than the industry average of 7.92. Clearly, LYG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lloyds Banking Group 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 Momentum Score of A. This gives LYG 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 one upward revision in the past sixty days compared to none downward, while the next year estimate has seen one upward revision compared to no downward revision in the same time period.
As a result, the current year consensus estimate increased 12.5% in the past two months, while the next year estimate also increased 12.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Notably, the stock with a solid earnings surprise history sports a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Lloyds Banking Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, the Zacks Rank #1 company indicates that the broader factors are favorable for the company.
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.
This Could Be the Fastest Way to Grow Wealth in 2019
Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.
These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.
Image: Bigstock
Is Lloyds Banking Group (LYG) a Good Value Investor Pick?
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 Lloyds Banking Group (LYG - 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, Lloyds Banking Group has a trailing twelve months PE ratio of 2.31, 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 17.8. If we focus on the long-term PE trend, Lloyds Banking Group’s current PE level puts it well below its midpoint of 9.57 over the past five years, with the number having risen rapidly over the past few months. However, 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 Finance Market sector’s trailing twelve months PE ratio, which stands at 13.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lloyds Banking Group has a forward PE ratio (price relative to this year’s earnings) of 6.78, 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, Lloyds Banking Group has a P/S ratio of 2.14. This is much 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 considerably below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Lloyds Banking Group currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lloyds Banking Group a solid choice for value investors.
Its P/CF ratio (another great indicator of value) comes in at 6.05, which is better than the industry average of 7.92. Clearly, LYG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lloyds Banking Group 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 Momentum Score of A. This gives LYG 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 one upward revision in the past sixty days compared to none downward, while the next year estimate has seen one upward revision compared to no downward revision in the same time period.
As a result, the current year consensus estimate increased 12.5% in the past two months, while the next year estimate also increased 12.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Lloyds Banking Group PLC Price and Consensus
Lloyds Banking Group PLC price-consensus-chart | Lloyds Banking Group PLC Quote
Notably, the stock with a solid earnings surprise history sports a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Lloyds Banking Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, the Zacks Rank #1 company indicates that the broader factors are favorable for the company.
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.
This Could Be the Fastest Way to Grow Wealth in 2019
Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.
These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.
Click here to see these breakthrough stocks now >>