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 Campbell Soup CompanyCPB 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, Campbell Soup has a trailing twelve months PE ratio of 11, 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 compares in at about 19.9. If we focus on the stock's long-term PE trend, the current level is fairly below the highs for the stock, suggesting that this might be a good entry point.
Further, the stock's PE also compares favorably with its industry's trailing twelve months PE ratio, which stands at 18.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Campbell Soup has a forward PE ratio (price relative to this year's earnings) of 12.1, 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, Campbell Soup has a P/S ratio of about 1.3. This is significantly lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this is a little below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading-at least compared to historical norms.
Broad Value Outlook
In aggregate, Campbell Soup 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 Campbell Soup a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 8.4, which is significantly lower than the industry average of 12.6. Clearly, CPB is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Campbell Soup 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 C and a Momentum score of F. This gives CPB a Zacks VGM score-or its overarching fundamental grade-of C. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recent earnings estimates have been bearish. The current year and next have seen no estimates go higher in the past 30 days compared to six movements in the opposite direction.
This has had a significant impact on the consensus estimate as the current year estimate decreased 6.1% in the past month, while the next year estimate has decreased 10.5% over the same time frame. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Campbell Soup Company Price and Consensus
Campbell Soup has just a Zacks Rank #3 (Hold), which indicates that while analysts have some apprehensions about the stock in the immediate future, the stock's growth story might be good over the long term. Thus, we are looking for in-line performance from the company in the near term.
Campbell Soup is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, However, with a sluggish industry rank (bottom 29%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past year, its industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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