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 Patterson Companies, Inc.PDCO 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, Patterson Companies has a trailing twelve months PE ratio of 14.2, 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, Patterson Companies has a P/S ratio of about 0.3. This is lower than the S&P 500 average, which comes in at 2.9x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Patterson Companies currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Patterson Companies a solid choice for value investors.
What About the Stock Overall?
Though Patterson Companies 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 D and a Momentum Score of B. This gives PDCO 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 mixed. The current quarter has seen one estimate go higher in the past sixty days compared to four lower, while the full year estimate has seen three up in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has decreased by 2.6% in the past two months, while the full year estimate has inched upper by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Patterson Companies, Inc. Price and Consensus
The stock has just a Zacks Rank #3 (Hold) and we are looking for in-line performance from the company in the near term.
Patterson Companies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among Bottom 39% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.