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 Reinsurance Group of America, IncorporatedRGA 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, Reinsurance Group of America has a trailing twelve months PE ratio of 13.19, 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 stands at about 19.77. While, Reinsurance Group of America's current PE level puts it above its midpoint of 10.25 over the past five years, it stands below the highs for this stock - suggesting that it could be a good entry point.
Further, the stock's PE also compares favorably with the Zacks classified Finance sector's trailing twelve months PE ratio, which stands at 16.48. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Reinsurance Group of America has a forward PE ratio (price relative to this year's earnings) of just 12.99, so it is fair to say that a slightly more value-oriented path may be ahead for Reinsurance Group of America 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, Reinsurance Group of America has a P/S ratio of about 0.73. This is way lower than the S&P 500 average, which comes in at 3.24 right now, indicating that the stock is undervalued from this aspect well.
Broad Value Outlook
In aggregate, Reinsurance Group of America 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 Reinsurance Group of America a solid choice for value investors.
What About the Stock Overall?
Though Reinsurance Group of America 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 'B'. This gives RGA a Zacks VGM score-or its overarching fundamental grade-of 'C'. (You can read more about the Zacks Style Scores here >> )
Nonetheless, the company's recent earnings estimates have been somewhat encouraging. The current quarter has seen two estimates go higher in the past thirty days compared to no downward revisions, while the full year estimate has seen one upward and downward revision each, in the same time period.
This has had a positive impact on the consensus estimate, as the current quarter consensus estimate has risen by 1.9% in the past one month, while the full year estimate has inched up by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Reinsurance Group of America, Incorporated Price and Consensus
However, this positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. Nonetheless, the definite bullish analyst sentiment indicates that the stock's growth story is intact.
Reinsurance Group of America is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 21%, which indicates that broader factors are favorable for the company. Further, over the past one year, the Zacks classified Insurance - Life Market industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that 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.