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 Worthington Industries, Inc. WOR 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, Worthington has a trailing twelve months PE ratio of 15.31, 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 19.86. If we focus on the long-term PE trend, Worthington’s current PE level puts it above its midpoint (which stands at 14.82) over the past five years. However, the number is still significantly below its recent highs.
Further, the stock’s PE also compares favorably with the Zacks classified Metal Products-Procurement and Fabrication industry’s trailing twelve months PE ratio, which stands at 26.88. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Worthington has a forward PE ratio (price relative to this year’s earnings) of 14.20, so it is fair to say that a slightly more value-oriented path may be ahead for Worthington stock in the near term too.
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate). The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Worthington’s PEG ratio stands at just 0.63, compared with the Zacks categorized Metal Products-Procurement and Fabrication industry average of 1.91. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Worthington currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Worthington 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 6.11, which is better than the industry average of 8.27. Clearly, Worthington is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Worthington 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 boasts a Growth grade of ‘A’ and a Momentum score of ‘A’. This gives WOR 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 earnings estimates have been steadily trending higher. While the consensus estimate for the current quarter has improved to 66 cents from 64 cents over the last 60 days, the full year estimate has improved to $3.27 from $3.15 over the same time frame.
This has had a mixed impact on the consensus estimate as well, as the current quarter consensus estimate has declined 1.5% in the last seven days, while the full year estimate has gone up by 1.9% over the same time frame.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Worthington Industries, Inc. Price and Consensus
This bullish trend might be why the stock has a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.
Worthington is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, with a good industry rank (Top 28% out of more than 250 industries) and a Zacks Rank #2 (Buy), the stock looks attractive at current valuations.
In fact, over the past one year, the Zacks categorized Metal Products-Procurement and Fabrication industry has clearly outperformed the broader market, as you can see below:
So value investors should seriously consider investing in Worthington, as it has solid prospects and is at an attractive valuation.
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Worthington Industries, Inc. (WOR): Free Stock Analysis Report
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