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 Plexus Corp.PLXS 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, Plexus has a trailing twelve months PE ratio of 19.02, as you can see in the chart below:
This level compares somewhat favorably with the market at large, as the PE for the S&P 500 stands at about 20.15. If we focus on the long-term PE trend, Plexus' current PE level puts it above its midpoint over the past five years.
Further, the stock's PE also compares unfavorably with the Zacks classified Electronic Manufactured Systems (EMS) industry's trailing twelve months PE ratio, which stands at 15.45. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Plexus has a forward PE ratio (price relative to this year's earnings) of just 16.69, so it is fair to say that a more value-oriented path may be ahead for the stock in the near term.
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, Plexus has a P/S ratio of about 0.73. This is considerably lower than the S&P 500 average, which comes in at 3.01 right now. However, Plexus is towards the higher end of its range in the time period from a 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, Plexus 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 Plexus a solid choice for value investors.
What About the Stock Overall?
Though Plexus 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 'B' and a Momentum score of 'A'. This gives PLXS 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 encouraging. The current quarter has seen two upward estimate revisions in the past sixty days compared to none downward, while the full year estimate has seen one upward and one downward revision in the same time period.
As a result, the current quarter consensus estimate has risen by 2.8% in the past two months, while the full year estimate has inched higher by 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Plexus Corp. Price and Consensus
Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Plexus is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 22%, which indicates that broader factors are favorable for the company. Also, over the past one year, the Zacks categorized Electronic Manufactured Systems (EMS) industry has clearly outperformed 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 and bullish analyst sentiment indicate that this stock could be a compelling pick.
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