Is Sony Corporation (SONY) an Appropriate Choice for Value Investors? – October 7, 2021



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 Sony Corporation (SONY 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, Sony Corporation has a twelve-month PE ratio of 12.46, as you can see in the graph 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 24.64. If we focus on the long term trend of PE, Sony Corporation’s current PE level puts it below its midpoint (which is 13.14) for the past five years. Additionally, the current level is well below the highs for the stock, suggesting that it may be a solid entry point.

Zacks investment researchImage source: Zacks Investment Research

Additionally, the stock’s PE also compares favorably to Zacks’ 12-month consumer discretionary PE ratio of 95.15. At the very least, it indicates that the title is currently relatively undervalued compared to its peers.

Zacks investment researchImage source: Zacks Investment Research

It should also be noted that Sony Corporation has a forward PE (price to earnings for this year) ratio of only 18.07, which is above the current level. So it’s fair to expect the company’s stock price to rise in the near term.

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.

At present, Sony Corporation has a P / S ratio of around 1.52. That’s a little lower than the S&P 500 average, which is currently 4.92 times. Additionally, as we can see in the chart below, this is well below the highs of this particular stock in recent years.

Zacks investment researchImage source: Zacks Investment Research

On the contrary, it suggests some level of undervalued trading, at least by historical standards.

Broad value outlook

Overall, Sony Corporation currently has a value score of B, which places it in the top 40% of all stocks we cover from this look. This makes Sony Corporation a solid choice for value investors, and some of its other key metrics show that quite clearly as well.

For example, the P / CF ratio (another great indicator of value) stands at 8.84, which is much better than the industry average of 21.09. Obviously, SONY is a solid choice in terms of value from a number of angles.

What about the stock as a whole?

While Sony Corporation 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 B. This gives SONY a Zacks VGM score – or its overall fundamental score – of C. (You can read more at Zacks style scores here >>)

Meanwhile, the company’s recent earnings estimates have been robust at best. The current year has seen one estimate increase over the past sixty days from any lower, while the following year’s estimate has seen an increase and no decrease over the same period.

This had a noticeable impact on the consensus estimate, as the current year’s consensus estimate increased by 2.4% in the past two months, while the following year’s estimate increased by 2.4%. slightly increased by 0.6%. You can see the trend of the consensus estimate and recent stock price development in the chart below:

This somewhat favorable trend is why the stock only ranks 2 Zacks (Buy) and why we are looking for better performance from the company in the short term.

Final result

Sony Corporation is an inspired choice for value investors because its incredible range of statistics is hard to beat on this front. In addition, a strong industry ranking (among the top 17% of over 250 industries) inspires our confidence. In fact, over the past couple of years, Zacks’ audio and video production industry has clearly outperformed the broader market, as you can see below:

Zacks investment researchImage source: Zacks Investment Research

Thus, it could be advantageous for value investors to deepen the outlook for the company, as the fundamentals indicate that this stock could be a compelling choice.


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