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 Glencore Plc GLNCY
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, Glencore has a trailing twelve months PE ratio of 12.6, 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 20.2. If we focus on the long-term PE trend, Glencore's current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock's PE also compares favorably with the industry's trailing twelve months PE ratio, which stands at 30.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Glencore has a forward PE ratio (price relative to this year's earnings) of just 9.3, so it is fair to say that a slightly more value-oriented path may be ahead for Glencore 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, Glencore has a P/S ratio of about 0.3. This is significantly lower than the S&P 500 average, which comes in at 3.3 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.
As we can see, the stock is trading almost at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend. Broad Value Outlook
In aggregate, Glencore 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 Glencore a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 6.2, which is better than the industry average of 7.8. Clearly, GLNCY is a solid choice on the value front from multiple angles. What About the Stock Overall?
Though Glencore 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 A and a Momentum score of A. This gives GLNCY 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 mixed at best. The current year has seen one estimate go higher in the past sixty days compared to none lower, while the next year estimate has seen zero upward and one downward revision in the same time period.
As a result, the current year consensus estimate has risen by 3% in the past two months, while the next year estimate has decreased nearly 1%.
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term. Bottom Line
Glencore is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 36% out of more than 250 industries) further supports the growth potential of the stock.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past three years, the industry has underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick. Moreover, broader factors at the industry level support the growth potential of the company as well. 5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits. Click here to see the 5 stocks >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Glencore PLC (GLNCY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research