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 GP Strategies Corporation GPX 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, GP Strategies has a trailing twelve months PE ratio of 17.9, as you can see in the chart below:
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, GP Strategies has a P/S ratio of about 0.7. This is a bit lower than the S&P 500 average, which comes in at 3.6x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, GP Strategies currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes GP Strategies a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for GP Strategies is just 1.1, a level that is far lower than the industry average of 1.8. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Clearly, GPX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though GP Strategies 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 Score of C and a Momentum Score of D. This gives GPX 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 pretty discouraging. The current quarter has seen no estimate to go higher in the past sixty days compared to one lower, while the full year estimate has seen no up and one down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has fallen by 10% in the past two months, while the full year estimate has inched lower by 4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
GP Strategies Corporation Price and Consensus
Despite this bearish trend, the stock has a Zacks Rank #3 (Hold) and that is why we are looking for better performance from the company in the near term.
GP Strategies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 20% out of more than 250 industries), it is hard to get too excited about this company overall. In fact, over the past six months, the industry has clearly underperformed the broader market, as you can see below:
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.