Here's Why Greenbrier Companies Could be a Great Value Stock

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 The Greenbrier Companies, Inc. GBX 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, Greenbrier Companies has a trailing twelve months PE ratio of 13.26, 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 22.27. While Greenbrier Companies’ current PE level puts it above its midpoint over the past five years, the current level stands well below the highs for the stock, suggesting that it could be a solid entry point.

Further, the stock’s PE compares favorably with the Zacks Transportation sector’s trailing twelve months PE ratio, which stands at 20.38. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Greenbrier Companies has a forward PE ratio (price relative to this year’s earnings) of just 12.63, so it is fair to say that a slightly more value-oriented path may be ahead for Greenbrier Companies stock in the near term too.

P/S 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, Greenbrier Companies has a P/S ratio of about 0.77. This is much lower than the S&P 500 average, which comes in at 3.53 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.

Broad Value Outlook

In aggregate, Greenbrier Companies currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Greenbrier Companies a solid choice for value investors.

What About the Stock Overall?

Though Greenbrier Companies 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 Score of F and a Momentum Score of D. This gives GBX a Zacks VGM score — or its overarching fundamental grade — of D. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been very encouraging. The current quarter and full year have seen three and five estimates go higher, respectively in the past sixty days compared to no downward revisions.

This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has risen by 11.5% in the past two months, while the full year estimate has inched higher by 3.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Greenbrier Companies, Inc. (The) Price and Consensus
 

Greenbrier Companies, Inc. (The) Price and Consensus | Greenbrier Companies, Inc. (The) Quote

Owing to this bullish trend, the stock boasts a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company in the near term.

Bottom Line

Greenbrier Companies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #1 company enjoys a strong Zacks Industry Rank (among top 20% of more than 250 industries), hinting at favorable broader factors. In fact, over the past two years, the industry has clearly outperformed 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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