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 MGIC Investment CorporationMTG 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, MGIC Investment has a trailing twelve months PE ratio of 11.43, 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, MGIC Investment has a P/S ratio of about 4.24. This is significantly higher than the S&P 500 average, which comes in at 3.03 right now. Also, as we can see in the chart below, this is close to the highs for this stock in particular over the past few years, suggesting that the stock is overvalued from a P/S perspective.
Broad Value Outlook
In aggregate, MGIC Investment 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 MGICInvestment a solid choice for value investors.
What About the Stock Overall?
Though MGIC Investment 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 'C' and a Momentum score of 'A'. This gives MTG 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 favorable. Both the current quarter and the current year have seen two estimates going higher in the past sixty days compared to none lower.
This has had just a small impact on the consensus estimate as the current quarter consensus estimate has risen by 4.3% in the past two months, while the full year estimate has also risen by 4%. You can see the consensus estimate trend and recent price actionfor the stock in the chart below:
MGIC Investment Corporation Price and Consensus
Meanwhile, the company's recent estimate revision trend has been favorable. The next year has seen one estimate going higher in the past thirty days compared to none lower. This however had an adverse impact on the consensus estimate as the next year estimate has decreased by 1.8% in the past one month.
This mixed trend indicates that while the stock's growth story is intact over the medium term, analysts have some apprehensions about the stock in the immediate future. That is why the stock has a just a Zacks Rank #3 (Hold) and we are looking for in-line performance from the company in the near term.
MGIC Investment is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, in spite of having a top industry rank (top 27%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past three years, the Zacks Categorized Insurance-Multiline industry industry has clearly underperformed the broader market, as you can see below:
Zacks' Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>