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 Jabil Circuit, Inc.JBL 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, Jabil Circuit has a trailing twelve months PE ratio of 15.57, as you can see in the chart below:
This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 20.15. If we focus on the PE trend, Jabil Circuit's current PE level is significantly below its highs over the past five years (which stands at 55.10). This suggests that the stock is undervalued compared to its historical levels.
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, Jabil Circuit has a P/S ratio of about 0.25. This is way lower than the S&P 500 average, which comes in at 2.82 right now. Also, as we can see in the chart below, this is around the midpoint for this stock in particular over the past five years, suggesting some level of undervalued trading-at least compared to historical norms.
Despite this bearish trend, we have a Zacks Rank #1 (Strong Buy) for the stock, which indicates expectations of outperformance from the company in the near term.
Jabil Circuit is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (Top 22% out of more than 250 industries) and a top Zacks Rank, the company deserves attention right now.
In fact, over the past one year, the Zacks categorized Electronics Manufacturing Services industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick. However, it might be prudent to wait for analyst sentiment to turn around first.
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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.