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 Insight Enterprises, Inc.NSIT 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, Insight Enterprises has a trailing twelve months PE ratio of 11.06, 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 21.02. If we focus on the long-term PE trend, Insight Enterprises' current PE level puts it below its midpoint of 12.99 over the past five years. Also, the current level stands well below the highs for the stock, suggesting that it could be a great entry point.
Further, the stock's PE compares favorably with the Zacks Retail - Wholesale sector's trailing twelve months PE ratio, which stands at 30.11. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Insight Enterprises has a forward PE ratio (price relative to this year's earnings) of just 9.04, so it is fair to say that a slightly more value-oriented path may be ahead for Insight Enterprises 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, Insight Enterprises has a P/S ratio of about 0.19. This is much lower than the S&P 500 average, which comes in at 3.37 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.
If anything, NSIT 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, Insight Enterprises currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Insight Enterprises a solid choice for value investors.
What About the Stock Overall?
Though Insight Enterprises 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 B and a Momentum Score of D. This gives NSIT 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 quite encouraging. The current quarter has seen two estimates go higher in the past sixty days compared to one downward revision, while the full year estimate has seen three upward and no downward revisions in the same time period.
This has had a noteworthy impact on the consensus estimate, as the current quarter consensus estimate has risen by 7.1% in the past two months, while the full year estimate has jumped 12.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Insight Enterprises, Inc. Price and Consensus
This bullish trend is why the stock sports a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Insight Enterprises is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #2 company flaunts a solid Zacks Industry Rank (among top 5% of more than 250 industries). In fact, over the past two years, the industry has clearly surpassed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick.
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