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 EPR Properties EPR 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:
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, EPR Properties has a trailing twelve months PE ratio of 6.15, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 21.04. If we focus on the long-term PE trend, EPR Properties’ current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Moreover, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 13.25. At the very least, this indicates that the stock is slightly undervalued right now, compared to its peers.
We should also point out that EPR Properties has a forward PE ratio (price relative to this year’s earnings) of just 8.49, so it is fair to say that a slightly more value-oriented path may be ahead for EPR Properties’ stock in the near term too.
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, EPR Properties’ P/CF ratio of 6.2 is lower than the Zacks Reit-Eqty Trust-Retail Market industry average of 11.53, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, EPR Properties 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 EPR Properties a solid choice for value investors.
What about the Stock Overall?
Though EPR Properties 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 F. This gives EPR 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 discouraging. The current year has seen one upward revision in the past sixty days compared to four downward revisions, while the fiscal year 2021 estimate has also seen one upward revision compared to four downward revisions in the same time period.
The current year consensus estimate has declined 17.3% in the past two months, whereas the fiscal year 2021 estimates fell 10.9% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
EPR Properties Price and Consensus
EPR Properties price-consensus-chart | EPR Properties Quote
Owing to the bearish estimate trend, the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
EPR Properties is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among bottom 8% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Finance sector has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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