Should Value Investors Buy MGM Growth Properties (MGP) Stock?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
MGM Growth Properties (MGP) is a stock many investors are watching right now. MGP is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 12.55. This compares to its industry's average Forward P/E of 15.48. Over the last 12 months, MGP's Forward P/E has been as high as 14.33 and as low as 11.20, with a median of 12.89.
We also note that MGP holds a PEG ratio of 1.47. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MGP's PEG compares to its industry's average PEG of 2.71. Over the past 52 weeks, MGP's PEG has been as high as 1.52 and as low as 0.69, with a median of 1.27.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MGP has a P/S ratio of 2.23. This compares to its industry's average P/S of 5.71.
Finally, our model also underscores that MGP has a P/CF ratio of 6.15. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. MGP's current P/CF looks attractive when compared to its industry's average P/CF of 15.82. Over the past year, MGP's P/CF has been as high as 6.88 and as low as 5.37, with a median of 6.12.
These are only a few of the key metrics included in MGM Growth Properties's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MGP looks like an impressive value stock at the moment.