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Is Loews Corporation (L) a Great Stock for Value Investors?

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 Loews CorporationL 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:

PE Ratio

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, Loews Corporation has a trailing twelve months PE ratio of 17.47, 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 compares in at about 19.77. If we focus on the stock's long-term PE trend, the current level puts Loews Corporation's current PE ratio tad above its midpoint over the past five years, with the number having trended modestly downwards over the past few months.

However, the stock's PE compares tad unfavorably with the Zacks classified Insurance-Multi line sector's trailing twelve months PE ratio, which stands at 16.04. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.

We should also point out that Loews Corporation has a forward PE ratio (price relative to this year's earnings) of just 14.99, which is below the current level. Hence the forward earnings estimates are already incorporated in the company's current share price.

P/S Ratio

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, Loews Corporation has a P/S ratio of about 1.20. This is a bit 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 little below the highs for this stock in particular over the past few years.

This implies that L is not in the higher 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, Loews Corporation 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 Loews Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, its P/CF ratio (another great indicator of value) comes in at 5.54, which is far better than the industry average of 7.64. Clearly, L is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Loews Corporation 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 'F'. This gives L 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 full year estimate has seen one up and one down in the last two months, while the current quarter has seen one estimate go lower in the past sixty days compared to no movements in the opposite direction.

This has had a modest impact on the consensus estimate though as the full year estimate has decreased by 2.5%, while the current quarter consensus estimate has declined 3.9% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Loews Corporation Price and Consensus

Loews Corporation Price and Consensus | Loews Corporation Quote

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.

Bottom Line

Loews Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (Top 27%) instills our confidence on the stock. In fact, over the past two years, the Zacks Insurance-Multi Line sub-industry has clearly outperformed the broader market, as you can see below:

However, with a Zacks Rank #3, it is hard to get too excited about this company overall. So, value investors might want to wait for estimates and 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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