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Wesco Aircraft: Is it a Good Choice for Value Investors?

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 Wesco Aircraft Holdings, Inc.WAIR 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, Wesco Aircraft has a trailing twelve months PE ratio of 13.41, 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 19.98. If we focus on the long-term PE trend, Wesco Aircraft's current PE level puts it slightly below its midpoint of 13.78 over the past five years. Moreover, the current level stands well below the highs for this stock, indicating that this could be a good entry point.

Further, the stock's PE also compares favorably with the Zacks classified Aerospace sector's trailing twelve months PE ratio, which stands at 20.37. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Wesco Aircraft has a forward PE ratio (price relative to this year's earnings) of just 12.64, so it is fair to say that a slightly more value-oriented path may be ahead for Wesco Aircraft 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, Wesco Aircraft has a P/S ratio of about 1.01. This is a way lower than the S&P 500 average, which comes in at 2.99 right now. Also, as we can see in the chart below, the multiple saw a sharp downtrend in 2014 and has been trading near its lows since then, suggesting that the current level might be a good entry point.

If anything, WAIR is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading-at least compared to historical norms.

Broad Value Outlook

In aggregate, Wesco Aircraft 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 Wesco Aircraft a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Wesco Aircraft is 1.63, a level that is slightly lower than the industry average of 1.76. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Clearly, WAIR is a solid choice on the value front from multiple angles.

What About the Stock Overall?

While Wesco Aircraft 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 'A' and a Momentum score of 'A'. This gives WAIR a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )

However, the company's recent earnings estimates have witnessed no revisions in the past sixty days. However, the consensus estimate has seen some movement, as the full year estimate has inched up by 0.9%, though the current quarter estimate has remained stable over the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Wesco Aircraft Holdings, Inc. Price and Consensus

Wesco Aircraft Holdings, Inc. Price and Consensus | Wesco Aircraft Holdings, Inc. Quote

Further, owing to the adverse factors affecting the Zacks categorized Aerospace/Defense industry, the stock currently carries a Zacks Rank #4 (Sell).

Bottom Line

Granted, Wesco Aircraft is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Though the company has a sluggish industry rank (Bottom 43% out of over 250 industries) and a drab Zacks Rank #4, the Zacks categorized Aerospace/Defense industry has meaningfully outperformed the broader market in the last one year. We believe that this should provide some cushion for the stock and help it rebound soon.

So, value investors might want to wait for a better entry point on the stock, 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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