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 RCI Hospitality Holdings, Inc.RICK 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, RCI Hospitality has a trailing twelve months PE ratio of 15.41, as you can see in the chart below:
We should also point out that RCI Hospitality has a forward PE ratio (price relative to this year's earnings) of 15.75, so it is fair to expect an increase in the company's share price in the near future.
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, RCI Hospitality has a P/S ratio of about 1.52. This is substantially lower than the S&P 500 average, which comes in at 3.15 right now. Also, as we can see in the chart below, the stock is trading at its high range over the past few years.
RICK is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company's stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, RCI Hospitality 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 RICK a solid choice for value investors.
What About the Stock Overall?
Though RCI Hospitality 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 'C'. This gives RICK 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 encouraging. The current quarter has seen one estimate go higher in the past sixty days, compared to none lower, while the full year estimate has seen one upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has jumped 25% in the past two months, while the full year estimate has risen by about 3.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
RCI Hospitality Holdings, Inc. Price and Consensus
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
RCI Hospitality 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 24% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. In fact, over the past one year, the Zacks Leisure and Recreation Services sector has clearly outperformed the broader market, as you can see below:
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