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 Everest Re Group, Ltd.RE 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, Everest Re Group has a trailing twelve months PE ratio of 9.97, as you can see in the chart below:
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, Everest Re Group has a P/S ratio of about 1.66. This is a bit lower than the S&P 500 average, which comes in at 1.80 right now. However, as we can see in the chart below, this level is around the historic highs for this stock over the past few years. This suggests that the stock is overvalued compared to its own historical levels and thus it might not be a suitable entry point.
Broad Value Outlook
In aggregate, Everest Re Group 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 Everest Re Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Everest Re Group is just 1.23, a level that is far lower than the industry average of 1.60. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate.Clearly, RE is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Everest Re Group 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 'D' and a Momentum score of 'B'. This gives RE 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 somewhat bullish. The current quarter has seen two estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen four up and no downward revisions in the same time period.
This has had a decidedly favorable impact on the consensus estimate, as the current quarter consensus estimate has risen by 2.1% in the past two months, while the full year estimates have inched higher by 1.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Everest Re Group, Ltd. Price and Consensus
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Everest Re Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 25%) and strong Zacks Rank, Everest Re Group looks like a strong value contender. In fact, over last one year, the Zacks categorized Insurance - Property and Casualty industry has outperformed the broader market, as you can see below:
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