Will Zebra Technologies Be A Great Pick 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 Zebra Technologies Corporation ZBRA 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, Zebra Technologies has a trailing twelve months PE ratio of 17.58. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.93.

If we focus on the long-term trend of the stock the current level puts the Zebra Technologies’ current PE close to its mid-point over the past five years (which stands at 17.62). The number has been in a lower territory since the past 1.5 years, after climbing as high as 29.4x in 2015. Thus, the present level looks to be a suitable entry point for the stock in this respect.

Further, the stock’s PE is almost in line with the Zacks classified Manufacturing - Thermal Products industry’s trailing twelve months PE ratio, which stands at 17.36. This indicates that the stock is reasonably valued right now, in relation to its peers.

We should also point out that Zebra Technologies has a forward PE ratio (price relative to this year’s earnings) of just 14.84, which is lower than the current level. Thus, it is fair to say that a slightly more value-oriented path may be ahead for Zebra Technologies stock in the near term.

PS Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Zebra Technologies has a P/S ratio of about 1.24. This is lower than the industry average, which comes in at 1.64 right now. Also, as we can see in the chart below, this is among the lows for this stock in particular over the past few years.

If anything, this suggests some level of undervalued trading for ZBRA—at least compared to historical norms.

Broad Value Outlook

In aggregate, Zebra Technologies 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 Zebra Technologies a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Zebra Technologies is just 1.65, a level that is lower than the industry average of 1.76. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 13.29, while the industry’s average stands at 19.16. Clearly, ZBRA is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Zebra Technologies 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 ‘A’ and a Momentum score of ‘F’. This gives ZBRA a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)

Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Zebra Technologies seems to have pretty striking prospects.

On the other hand, the company’s recent earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen two up and one down in the same time period.

This has had just a small impact on the consensus estimate though as the current quarter consensus estimate inched up 0.6% in the past two months, while the full year estimate has declined 0.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Zebra Technologies Corporation Price and Consensus

Zebra Technologies Corporation Price and Consensus | Zebra Technologies Corporation Quote

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Zebra Technologies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Notably, the Zacks categorized Manufacturing - Thermal Products industry has outperformed the broader market over the past year, as you can see below:

However, though the solid Industry Rank (Top 15% out of more than 250 industries) warrants attention right now, a medium ranking (Zacks Rank #3) somewhat dims the sparkle. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

Zacks' Top Investment Ideas for Long-Term Profit

How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Zebra Technologies Corporation (ZBRA): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research