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 BNP Paribas SABNPQY 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, BNP Paribas has a trailing twelve months PE ratio of 11.18, 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 20.1. If we focus on the long-term PE trend, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Further, the stock's PE also compares favorably with the Zacks classified Bank-Foreign industry's trailing twelve months PE ratio, which stands at 16.04. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that BNP Paribas has a forward PE ratio (price relative to this year's earnings) of just 9.98, so it is fair to say that a slightly more value-oriented path may be ahead for the 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, BNP Paribas has a P/S ratio of about 1.71. This is considerably lower than the S&P 500 average, which comes in at 3.01 right now. This level is below the highs for this stock.
If anything, this suggests some level of undervalued trading-at least compared to historical norms.
Broad Value Outlook
In aggregate, BNP Paribas currently has a Zacks Value Style Score of 'B', putting it into the top 40% of all stocks we cover from this look. This makes BNP Paribas a good choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for BNP Paribas is just 1.14, a level that is lower than the industry average of 2.08. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 3.60, which is better than the industry average of 4.61. Clearly, BNPQY is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though BNP Paribas 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 'F' and a Momentum score of 'A'. This gives BNPQY a Zacks VGM score-or its overarching fundamental grade-of 'C'. (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 two downward estimate revisions in the past sixty days compared to none upward, while the next year has seen one upward and one downward estimate revisions in the same time frame.
As a result, the current year consensus estimate has dipped by 3.5% in the past two months, while the next year estimate has inched higher by 2.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
BNP Paribas SA Price and Consensus
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.
BNP Paribas 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 26% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past one year, the Zacks Banks-Foreign industry has outperformed the broader market, as you can see below:
Notably, the stock has a long term expected earnings growth of 8.8% and sports a Zacks Rank #3 (Hold). These mixed expectations indicate that while the stock's growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be 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.