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 Nomad Foods LimitedNOMD 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 o f 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, Nomad Foods Limited has a trailing twelve months PE ratio of 13.6, 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 17.4. If we focus on the stock's long-term PE trend, the current level puts Nomad Foods Limited's current PE ratio slightly below its midpoint (which is 14.7) over the past two years.
We should also point out that Nomad Foods Limited has a forward PE ratio (price relative to this year's earnings) of just 11.8, so it is fair to say that a slightly more value-oriented path may be ahead for Nomad Foods Limited's 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, Nomad Foods Limited has a P/S ratio of about 1.3. This is somewhat lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past couple of years.
If anything, this suggests some level of undervalued trading-at least compared to historical norms.
Broad Value Outlook
In aggregate, Nomad Foods Limited currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes NOMD a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Nomad Foods Limited is just 1.1, a level that is slightly lower than the industry average of 1.9. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Clearly, NOMD is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Nomad Foods Limited 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 NOMD a VGM score-or its overarching fundamental grade-of D. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recen t earnings estimates have been encouraging. The full-year 2019 has seen one estimate go higher in the past sixty days and none lower.
This has had a positive impact on the consensus estimate, as the full-year 2019 consensus estimate has risen about 1.3% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Nomad Foods Limited Price and Consensus
This favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Nomad Foods Limited is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company's prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (bottom 34% out of more than 250 industries). In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors and industry trends to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.