U.S. Markets closed

Is Pilgrim's Pride (PPC) a Great Stock for Value Investors?

Zacks Equity Research
1 / 7

Company News For Jul 20, 2018

Companies in the news are: TRV, IBM, EBAY, DHR

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 Pilgrim's Pride Corporation PPC 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, Pilgrim's Pride has a trailing twelve months PE ratio of 6.4, 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 19.8x. If we focus on the long-term PE trend, Pilgrim's Pride’s current PE level puts it below its midpoint over the past five years, with the number having risen rapidly over the past few months.

Further, the stock’s PE also compares favorably with the broader industry’s trailing twelve months PE ratio, which stands at 12.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Pilgrim's Pride has a forward PE ratio (price relative to this year’s earnings) of just 6.7, so it is fair to say that a slightly more value-oriented path may be ahead for Pilgrim's Pride 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, Pilgrim's Pride has a P/S ratio of about 0.4. This is significantly lower than the S&P 500 average, which comes in at 3.3x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.

If anything, PPC is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, Pilgrim's Pride currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Pilgrim's Pride a solid choice for value investors.

What About the Stock Overall?

Though Pilgrim's Pride 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 A. This gives SFS a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been upbeat. The current year has seen one estimate go higher in the past sixty days, while the next year estimates remained stable.

This has had just a small impact on the consensus estimate though as the current year consensus estimate has remained stable in the past two months, while the next year estimate has increased by 4.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Pilgrim's Pride Corporation Price and Consensus

 

Pilgrim's Pride Corporation Price and Consensus | Pilgrim's Pride Corporation Quote

This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

Pilgrim's Pride is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 12% of more than 250 industries) instills our confidence. In fact, over the past two years, the broader industry has clearly outperformed the market at large, 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.

More Stock News: This Is Bigger than the iPhone! 

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. 

Click here for the 6 trades >>


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
 
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research