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Is Methode (MEI) Stock Undervalued Right Now?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is Methode (MEI). MEI is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 8.54, which compares to its industry's average of 23.78. Over the last 12 months, MEI's Forward P/E has been as high as 14.43 and as low as 6.64, with a median of 10.49.

MEI is also sporting a PEG ratio of 0.85. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MEI's PEG compares to its industry's average PEG of 2.14. MEI's PEG has been as high as 0.96 and as low as 0.81, with a median of 0.85, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. MEI has a P/S ratio of 1.13. This compares to its industry's average P/S of 1.28.

Finally, investors will want to recognize that MEI has a P/CF ratio of 7.80. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. MEI's P/CF compares to its industry's average P/CF of 19.64. Within the past 12 months, MEI's P/CF has been as high as 25.04 and as low as 6.71, with a median of 14.10.

These are only a few of the key metrics included in Methode's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MEI looks like an impressive value stock at the moment.


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