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 Nexstar Media Group, Inc.NXST 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, Nexstar has a trailing twelve months PE ratio of 17. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.1.
If we focus on the long-term trend of the stock the current level puts Nexstar's current PE among its lower zone, well below its median for the term (which stands at 22x). Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
We should also point out that Nexstar has a forward PE ratio (price relative to this year's earnings) of 16.6, which lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Nexstar 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, Nexstar has a P/S ratio of about 1.7. This is significantly lower than the industry average, which comes in at 9.1x right now.
If anything, NXST is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading-at least compared to historical norms.
Broad Value Outlook
In aggregate, Nexstar currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Nexstar an apt choice for value investors, and all of the above listed metrics make this pretty clear too.
What About the Stock Overall?
Though Nexstar 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 B and a Momentum score of B. This gives NXST 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 earnings estimates have been trending upward lately. The current quarter has seen three estimates go higher in the past thirty days compared to none lower, while the full year estimate has seen two upward revisions and one downward revision in the same time period.
This has had a small but meaningful impact on the consensus estimate though as the current quarter consensus estimate has increased 5.5% over the past month, while the full year estimate has moved up 3.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Nexstar Broadcasting Group, Inc. Price and Consensus
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Golar LNG Partners is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company's favor.
Nexstar 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 (among the Bottom 38% 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, its industry has clearly underperformed the broader market, as you can see below:
Nevertheless, despite a Zacks Rank #3, we believe that bullish analyst sentiment makes this value stock a compelling pick.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.