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 Regions Financial Corporation (RF - 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, Regions Financial has a trailing twelve months PE ratio of 10.14, 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 17.58. If we focus on the stock’s long-term PE trend, the current level puts Regions Financial’s current PE ratio somewhat below its midpoint (which is 13.39) over the past five years.
Further, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 14.07. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Regions Financial has a forward PE ratio (price relative to this year’s earnings) of just 9.03, so it is fair to say that a slightly more value-oriented path may be ahead for Regions Financial’s stock in the near term too.
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, Regions Financial has a P/S ratio of about 2.23. This is noticeably lower than the S&P 500 average, which comes in at 3.15 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, Regions Financial currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes RF a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Preferred Bank is just 1.10, a level that is slightly lower than the industry average of 1.28. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, the P/CF ratio (another great indicator of value) comes in at 7.23, which is somewhat better than the industry average of 11.34. Clearly, RF is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Regions Financial 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 D and a Momentum score of C. This gives RF a 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 disappointing. The current year has seen 14 estimates go lower in the past sixty days and five higher, while the full-year 2019 estimate has seen 15 downward and one upward revisions in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has dipped 0.6% in the past two months, while the full year estimate has slipped 1.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below: