Is Great Southern Bancorp a Good Choice for Value Investors?

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 Great Southern Bancorp, Inc. GSBC 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:

PE Ratio

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, Great Southern Bancorp has a trailing twelve months PE ratio of 15.42, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.10. While Great Southern Bancorp’s current PE level puts it above its midpoint of 11.94 over the past five years, the current level stands slightly below the highs for this stock, as is reflected in the chart below.

Further, the stock’s PE also compares stands little below the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 16.37. At the very least, this indicates that the stock is slightly undervalued right now, compared to its peers.

We should also point out that Great Southern Bancorp’s forward PE is roughly same as its trailing twelve months value, so we might say that the forward earnings estimates are incorporated in the company’s share price as of now. We define forward PE as current price relative to the Zacks Consensus Estimate for the current fiscal year.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.

The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.

In this case, Great Southern Bancorp’s P/CF ratio of 10.78 is lower than the Zacks classified Finance – Savings & Loans industry average of 13.89, which indicates that the stock is relatively undervalued in this respect.

Broad Value Outlook

In aggregate, Great Southern Bancorp currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Great Southern Bancorp a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Great Southern Bancorp is 1.78, a level that is a bit lower than the industry average of 1.97. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/S ratio (another great indicator of value) comes in at 3.66, which is better than the industry average of 3.98. Clearly, GSBC is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Great Southern Bancorp 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 ‘D’ and a Momentum score of ‘C’. This gives GSBC a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)

Nonetheless, the company’s recent earnings estimates have somewhat encouraging. While current quarter estimate has seen one upward and downward revision each, in the past sixty days, the full year estimate has seen two upward and no downward revision in the same time period.

This has had a meaningful impact on the consensus estimate though as the current quarter consensus estimate has risen by 1.3% in the past two months, while the full year estimate has increased by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Great Southern Bancorp, Inc. Price and Consensus
 

Great Southern Bancorp, Inc. Price and Consensus | Great Southern Bancorp, Inc. Quote

This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

Great Southern Bancorp is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Also, the company boasts a solid Industry Rank (Top 31% out of over 250 industries), which indicates that the broader factors are favorable for the company. Incidentally, over the past two years, the Zacks classified Finance – Savings & Loans industry has significantly crushed 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 indicate that this stock could be a compelling pick.

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