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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 Newell Brands Inc. NWL 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, Newell Brands has a 12-month PE ratio of 11.75, as you can see in the chart below:
Image source: Zacks Investment Research
This level actually compares quite favorably with the market as a whole, as the PE for the S&P 500 is around 24.53. If we focus on the long term trend of PE, Newell Brands’ 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 Consumer Staples sector’s last twelve-month PE ratio, which stands at 21.87. 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 Newell Brands has a forward PE (price to earnings for this year) ratio of just 10.31, so it’s fair to say that a slightly more value-driven path may be ahead for shares of Newell Brands in the short term. too much.
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, Newell Brands has a P / S ratio of around 0.94. That’s below the S&P 500 average, which currently sits at 5.09. 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, NWL 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, Newell Brands 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 Newell Brands a solid choice for value investors.
What about the stock as a whole?
While Newell Brands 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 F and a Momentum Score of C. This gives NWL 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 in the same year. period.
This had a negative impact on the consensus estimate, as the consensus estimate for the current year fell 19.7% in the past two months, while the estimate for the year 2021 decreased by 1.4%. You can see the trend of the consensus estimate and recent stock price development in the chart below:
Price and consensus of Newell Brands Inc.
Newell Brands Inc. price-consensus-chart | Quote from Newell Brands Inc.
Despite the bearish sentiment of analysts, the stock holds a Zacks Rank # 3 (Hold). Thus, we are looking for online performance from the company in the short term.
Final result
Newell Brands is an inspired choice for value investors, as its incredible range of stats is hard to beat on this front.
However, with a slow industry ranking (among the lowest 22% 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, Zacks – Staples’ consumer products industry has clearly underperformed the market as a whole, 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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Newell Brands Inc. (NWL): Free Stock Analysis Report
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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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