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Is Pilgrim's Pride (PPC) a Suitable for Value Investors Now?

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  • PPC
  • ^GSPC

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 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 14.7, as you can see in the chart below:

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 24.5. If we focus on the long-term PE trend, its current PE level puts it above its midpoint over the past five years.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 22.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

We should also point out that Pilgrim's Pride has a forward PE ratio (price relative to this year’s earnings) of just 12.7, so it is fair to say that a slightly more value-oriented path may be ahead for the 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 0.5. This is a lower than the S&P 500 average, which comes in at 5.1 right now. Also, we can see in the chart below, this is slightly above the highs for this stock in particular over the past few years.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

If anything, this suggests 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, and other key metrics makes this pretty clear too.

Additionally, the PEG ratio (another great indicator of value) comes in at 0.4, (which is somewhat better than the industry average of 1.6). Clearly, PPC is a solid choice on the value front from multiple angles.

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 A and a Momentum Score of C. This gives PPC a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen one estimate each go up and down while the next year has seen two estimates go up while none estimate moved down in the past sixty days.

Thus, in the past two months, the Zacks Consensus Estimate for its earnings per share for the current year and the next year has improved by 4.1% and 8.6%, respectively. 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 Price and Consensus

Pilgrim's Pride Corporation price-consensus-chart | Pilgrim's Pride Corporation Quote

Despite having a bullish trend, PPC carries a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company 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. Moreover, a strong industry rank (top 33%) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.


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Zacks Investment Research