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Should Value Investors Pick World Acceptance (WRLD) 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 World Acceptance Corporation WRLD 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, World Acceptance has a trailing twelve months PE ratio of 11.79, as you can see in the chart below:
 

Zacks Investment ResearchImage Source: Zacks Investment Research

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 27.90. If we focus on the long-term PE trend, World Acceptance’s current PE level puts it above its midpoint over the past five years.
 

Zacks Investment ResearchImage Source: Zacks Investment Research

Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 19.25. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
 

Zacks Investment ResearchImage Source: Zacks Investment Research

However, we should point out that World Acceptance has a forward PE ratio (price relative to this year’s earnings) of 19.10, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.

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, World Acceptance has a P/S ratio of about 1.94. This is lower than the S&P 500 average, which comes in at 5.22 right now. As we can see in the chart below, this is slightly above the median for this stock in particular over the past few years.
 

Zacks Investment ResearchImage Source: Zacks Investment Research

WRLD is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.

Broad Value Outlook

In aggregate, World Acceptance 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 World Acceptance a solid choice for value investors.

What About the Stock Overall?

Though World Acceptance 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 WRLD a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current fiscal quarter has seen one estimate go higher in the past sixty days compared to one lower, while the fiscal full year estimate has seen two upward and one downward revision in the same time period.

As a result, the current fiscal quarter consensus estimate has risen by 5.8% in the past two months, while the fiscal full year estimate has declined 8.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

World Acceptance Corporation Price and Consensus

World Acceptance Corporation Price and Consensus

World Acceptance Corporation price-consensus-chart | World Acceptance Corporation Quote

This somewhat mixed 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.

Bottom Line

World Acceptance is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 15% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past two years, the industry has outperformed the broader market, as you can see below:
 

Zacks Investment ResearchImage Source: Zacks Investment Research

However, with a Zacks Rank #3, it is hard to get too excited about this company overall. 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.

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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.

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