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Can Value Investors Consider Amdocs (DOX) Stock Right Now?
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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 Amdocs Limited (DOX - 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, Amdocs has a trailing twelve months PE ratio of 16.85, 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 18.52. If we focus on the long-term PE trend, Amdocs’s current PE level puts it below its midpoint of 17.8 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 Computers – IT Services industry’s trailing twelve months PE ratio, which stands at 17.61. At the very least, this indicates that the stock is undervalued right now, compared to its peers.
We should also point out that Amdocs has a forward PE ratio (price relative to this year’s earnings) of just 15.43, so it is fair to say that a slightly more value-oriented path may be ahead for Amdocs 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, Amdocs has a P/S ratio of about 2.25. This is a bit lower than the S&P 500 average, which comes in at 3.26x 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, this suggests some level of overvalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Amdocs currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Amdocs a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 12.43, which is far better than the industry average of 14.39. Clearly, DOX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Amdocs 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 a Momentum Score of F. This gives DOX 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 none estimate go higher in the past sixty days compared to four lower, while the full year estimate has seen four up and none down in the same time period.
This has had a mixed impact on the consensus estimate though as the current quarter consensus estimate has dropped by 5.3% in the past two months, while the full year estimate has inched higher by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Apart from this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) which is why we are looking for outperformance from the company in the near term.
Bottom Line
Amdocs is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 29% of more than 250 industries) instills our confidence. In fact, over the past two years, the Zacks Computer - IT Services industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Can Value Investors Consider Amdocs (DOX) Stock Right 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 Amdocs Limited (DOX - 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, Amdocs has a trailing twelve months PE ratio of 16.85, 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 18.52. If we focus on the long-term PE trend, Amdocs’s current PE level puts it below its midpoint of 17.8 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 Computers – IT Services industry’s trailing twelve months PE ratio, which stands at 17.61. At the very least, this indicates that the stock is undervalued right now, compared to its peers.
We should also point out that Amdocs has a forward PE ratio (price relative to this year’s earnings) of just 15.43, so it is fair to say that a slightly more value-oriented path may be ahead for Amdocs 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, Amdocs has a P/S ratio of about 2.25. This is a bit lower than the S&P 500 average, which comes in at 3.26x 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, this suggests some level of overvalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Amdocs currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Amdocs a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 12.43, which is far better than the industry average of 14.39. Clearly, DOX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Amdocs 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 a Momentum Score of F. This gives DOX 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 none estimate go higher in the past sixty days compared to four lower, while the full year estimate has seen four up and none down in the same time period.
This has had a mixed impact on the consensus estimate though as the current quarter consensus estimate has dropped by 5.3% in the past two months, while the full year estimate has inched higher by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Amdocs Limited Price and Consensus
Amdocs Limited price-consensus-chart | Amdocs Limited Quote
Apart from this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) which is why we are looking for outperformance from the company in the near term.
Bottom Line
Amdocs is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 29% of more than 250 industries) instills our confidence. In fact, over the past two years, the Zacks Computer - IT Services industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>