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 Israel Chemicals ICL 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, Israel Chemicals has a trailing twelve months PE ratio of 14.22, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.76. If we focus on the long-term PE trend, Israel Chemicals’ current PE level puts it slightly above its midpoint of 13.74 over the past three years. However, the current level stands below the highs for the stock, suggesting that it can be a solid entry point.
However, the stock’s PE compares unfavorably with the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 12.48. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should point out that Israel Chemicals has a forward PE ratio (price relative to this year’s earnings) of just 12.81, so it is fair to say that a slightly more value-oriented path may be ahead for Israel Chemicals’ 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, Israel Chemicals has a P/S ratio of just 1.22. This is much lower than the S&P 500 average, which comes in at 3.24 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.
Broad Value Outlook
In aggregate, Israel Chemicals currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Israel Chemicals a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Israel Chemicals is 1.35, a level that is lower than the industry average of 1.39. 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 7.76, which is better than the industry average of 8.75. Clearly, ISL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Israel Chemicals 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 Score of F and Momentum Score of F. This gives ISL a Zacks VGM score — or its overarching fundamental grade — of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen two estimates go higher in the past sixty days, compared to none lower, while the next year estimate has seen two upward and no downward revisions in the same time period.
As a result, the current year consensus estimate increased 5.12% in the past two months, while the next year estimate increased by 4.76%. You can
see the consensus estimate trend and recent price action for the stock in the chart below:
Israel Chemicals Shs Price and Consensus
Israel Chemicals Shs Price and Consensus | Israel Chemicals Shs Quote
Notably, the stock with a solid earnings surprise history and long-term EPS growth rate of 9.5% has a Zacks Rank #2 (Buy), which is why we are looking for outperformance from the company in the near term.
Israel Chemicals is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, the company carries a sluggish industry rank (among Bottom 18% of more than 250 industries). In fact, over the past two years, the broader industry has underperformed the market at large as you can see below:
Moreover, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for broader factors 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.