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 tronc, Inc. TRNC 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, Tronc has a trailing twelve months PE ratio of 8.00, 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 20.40. If we focus on the long-term PE trend, Tronc's current PE level puts it above its midpoint over the past two years.
Further, the stock's PE also compares favorably with the Zacks classified Publishing - Newspapers industry's trailing twelve months PE ratio, which stands at 18.35. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Tronc has a forward PE ratio (price relative to this year's earnings) of 45.44, so it is fair to say that the stock price is likely to appreciate in future
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, Tronc has a P/S ratio of about 0.26. This is a bit 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 well below the highs for this stock in particular over the past two years, , suggesting some level of undervalued trading-at least compared to historical norms
Broad Value Outlook
In aggregate, Tronc 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 Tronc a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio comes in at 3.72, which is far better than the industry average of 5.22. Clearly, TRNC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Tronc 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 TRNC 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 encouraging. The current quarter has seen one estimate go higher in the past sixty days compared to none lower, while the full year estimate has seen one up and no down in the same time period.
This has had just a small impact on the consensus estimate as the current quarter consensus estimate has risen from a los of 7 cents to an earnings of 1 cent. in the past two months, while the full year estimate has grown78.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
tronc, Inc. Price and Consensus
tronc, Inc. Price and Consensus | tronc, Inc. Quote
Even though Western Union has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Tronc is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 14% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Publishing - Newspapers industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>
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 tronc, Inc. (TRNC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research