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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 go unnoticed and are attractive buys, or offer great discounts off their fair value?
One way to find these companies is to look at several key financial indicators and ratios, many of which are crucial in the process of selecting value stocks. Let’s put Altria Group (MO – Free Report) into this equation and find out if this is a good choice for value investors right now, or if investors who subscribe to this methodology should look elsewhere for the best choices:
P / E ratio
A key metric that value investors always look at is the price / earnings ratio, or PE for short. It shows us how much investors are willing to pay for every dollar in profit in any given stock, and it’s 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 industry / sector average; and c) how it compares to the market as a whole.
On this front, Altria Group has a 12-month PE ratio of 9.85, as you can see in the chart below:
Image source: Zacks Investment Research
This level actually compares quite favorably to the market as a whole, as the PE for the S&P 500 is around 24.47. If we focus on the long-term PE trend, the Altria Group’s current PE level puts it below its midpoint (which is 12.45) over the past five years, with that number increasing rapidly over the past five years. in recent months.
Image source: Zacks Investment Research
In addition, the stock’s PE also compares favorably with the Zacks Consumer Staples sector’s last twelve-month PE ratio, which stands at 22.07. At the very least, it indicates that the title is currently relatively undervalued compared to its peers.
Image source: Zacks Investment Research
We also have to point out that the Altria Group has a forward PE (price to earnings for this year) ratio of just 9.63, so it’s fair to say that a slightly more value-oriented path may be ahead. for short-term Altria group shares too.
P / S ratio
Another key indicator to note is the price / sales ratio. This approach compares the price of a given stock to its total sales, where a lower reading is generally considered better. Some people like this value metric more than others because it looks at sales, something that is much harder to manipulate with accounting tricks than profits.
Currently, Altria Group has a P / S ratio of approximately 3.14. That’s a little lower than the S&P 500 average, which currently sits at 5.09x. Additionally, as we can see in the chart below, this is well below the highs of this particular stock in recent years.
Image source: Zacks Investment Research
On the contrary, it suggests some level of undervalued trading, at least by historical standards.
Broad value outlook
Overall, Altria Group currently has a value score of B which places it in the top 40% of all stocks we cover from this look. This makes Altria Group a solid choice for value investors, and some of its other key metrics show that quite clearly as well.
What about the stock as a whole?
While Altria Group can be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it’s worth noting that the company has a Growth Score of C and Momentum Score of D. This gives AAPL a Zacks VGM score – or its overall fundamental score – of B. (You can read more at Zacks style scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates increase in the past sixty days from none lower, while the estimate for the full year has three, two rising and one falling over the same period.
This had only a small impact on the consensus estimate, as the current quarter’s consensus estimate rose 3.8% in the past two months, while the year’s estimate whole share edged down 0.2%. You can see the trend of the consensus estimate and recent stock price development in the chart below:
This somewhat mixed trend is why the stock is only ranked 3 Zacks (Hold) and why we are looking for short-term online performance from the company.
Final result
Altria Group is an inspired choice for value investors, as its incredible range of statistics is hard to beat on this front. However, with a slow industry ranking (among the bottom 12% of over 250 industries) and a Zacks # 3 ranking, it’s hard to get too excited about this business as a whole. In fact, over the past couple of years the Zacks tobacco industry has clearly underperformed the broader market, as you can see below:
Image source: Zacks Investment Research
So value investors may want to wait for estimates and analyst sentiment to turn around first on this name, but once that happens, this stock could be a compelling choice.
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