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Should Value Investors Consider Time Inc. (TIME) Stock?

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 Time Inc.TIME 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:

PE Ratio

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, Time Inc. has a trailing twelve months PE ratio of 11.64, 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 20.40. Further, Time Inc.'s current PE level puts it below its midpoint of 14.27 over the past three years. Moreover, it stands well below the highs for the stock, indicating that it could be a solid entry point.

Further, the stock's PE also compares favorably with the Zacks classified Consumer Staples sector's trailing twelve months PE ratio, which stands at 25.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Time Inc. has a forward PE ratio (price relative to this year's earnings) of just 10.32, so it is fair to say that a slightly more value-oriented path may be ahead for Time Inc. stock in the near term too.

P/S Ratio

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, Time Inc. has a P/S ratio of about 0.42. This is much lower than the S&P 500 average, which comes in at 3.15 right now, indicating that the company is undervalued from this aspect too.

Broad Value Outlook

In aggregate, Time Inc. currently has a Zacks Value Style Score of 'B', putting it into the top 40% of all stocks we cover from this look. This makes Time Inc. a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Time Inc. is just 2.06, a level that is lower than the industry average of 2.45. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Clearly, TIME is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Time Inc. 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 and a Momentum score of 'D', each. This gives TIME a Zacks VGM score-or its overarching fundamental grade-of 'C'. (You can read more about the Zacks Style Scores here >> )

The company's recent earnings estimates have been quite discouraging. The current quarter has seen two estimates go lower in the past sixty days compared to no upward revisions, while the full year estimate has seen one upward and downward revision each, over the same time frame.

This has had a negative impact on the consensus estimate, as the current quarter consensus estimate has slumped 44.8% in the past two months, while the full year estimate has inched lower by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Time Inc. Price and Consensus

Time Inc. Price and Consensus | Time Inc. Quote

Owing to this bearish trend, the stock has just a Zacks Rank #3 (Hold), which indicates that we are looking for in-line performance from the company in the near term.

Bottom Line

Time Inc. 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 9%, which indicates that broader factors are favorable for the company. Further, over the past one year, the Zacks categorized Publishing - Periodicals industry's performance has outperformed the broader market, as you can see below:

So, value investors might want to wait for estimates to turn around in this name first, but once that happens, 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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