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 Tyson Foods Inc.TSN 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, Tyson Foods has a trailing twelve months PE ratio of 12.2, 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 19.7x. If we focus on the long-term PE trend, Tyson Foods' current PE level puts it below its midpoint over the past five years.
We should also point out that Tyson Foods has a forward PE ratio (price relative to this year's earnings) of just 10.7, so it is fair to say that a slightly more value-oriented path may be ahead for the 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, Tyson Foods has a P/S ratio of about 0.7. This is a bit lower than the S&P 500 average, which comes in at 3.3x 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, Tyson Foods currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Tyson Foods a solid choice for value investors.
What About the Stock Overall?
Though Tyson Foods 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 F. This gives TSN 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 discouraging. The current quarter has seen two estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen one up and three down in the same time period.
As a result, the current quarter consensus estimate has decreased by 2.8% in the past month, while the full year estimate has inched lower by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Tyson Foods, Inc. Price and Consensus
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Tyson Foods is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Also, with a good industry rank (top 13%) the company deserves attention right now. However, over the past year, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.