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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 MGM Growth Properties LLC (MGP) 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-to-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, MGM Growth Properties has a 12-month PE ratio of 16.83, 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 25.27. If we focus on the long term trend of PE, MGM Growth Properties’ current PE level puts it below its midpoint over the past five years.
Image source: Zacks Investment Research
In addition, the stock’s PE compares favorably to the Zacks Finance sector’s twelve-month PE ratio, which stands at 16.43. At the very least, it indicates that the title is currently relatively undervalued compared to its peers.
Image source: Zacks Investment Research
We should also point out that MGM Growth Properties has a forward PE (price to earnings for this year) ratio of just 15.85, so it’s fair to say that a slightly more value-driven path may be ahead. for the action MGM Growth Properties term also.
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 more difficult to manipulate with accounting tricks than profits.
Right now, MGM Growth Properties has a P / S ratio of around 8. This is below the S&P 500 average, which currently sits at 5.07. Also, as we can see in the graph below, that number is below the highs of this particular stock in recent years.
Image source: Zacks Investment Research
If anything, MGP is in the lower end of its range in the time frame from a P / S metric, suggesting some level of undervalued trading, at least by historical standards.
Broad value outlook
Overall, MGM Growth Properties currently has a Zacks value score of A, which places it in the top 20% of all stocks we cover from this look. This makes MGM Growth Properties a solid choice for value investors.
What about the stock as a whole?
While MGM Growth Properties may be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it should be noted that the company has a Growth score of F and a Momentum score of C. This gives MGP a Zacks VGM score – or its overall fundamental score – of A. (You can read more at Zacks style scores here >>)
Meanwhile, the company’s recent earnings estimates have been disappointing. The current year has seen five estimates increase in the last sixty days compared to three decreases, while the estimate for the year 2021 has seen three upward revisions against one downward during the same. period.
This had a negative impact on the consensus estimate, as the current year’s consensus estimate increased by 19.7% in the past two months, while the year 2021 estimate ‘is improved by 1.4%. You can see the trend of the consensus estimate and recent stock price development in the chart below:
MGM Growth Properties LLC Price and Consensus
MGM Growth Properties LLC price-consensus-chart | MGM Growth Properties LLC quote
Despite the bearish sentiment of analysts, the stock holds a Zacks Rank # 3 (Hold). Thus, we are looking for short-term business online performance.
Final result
MGM Growth Properties is an inspired choice for value-driven investors, as it’s hard to beat its incredible range of statistics on this front.
However, with a slow industry ranking (among the lowest 37% in 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 REIT and Equity Trust – Other industry has clearly underperformed the market as a whole, as you can see below:
Image source: Zacks Investment Research
So value investors might want to wait for analyst estimates and sentiment to turn around first under this name, but once that happens, this stock could be a compelling choice.
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MGM Growth Properties LLC (MGP): Free Stock Analysis Report
To read this article on Zacks.com, click here.
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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