Is SKF AB (SKFRY) a Great Stock for Value Investors?
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 SKF AB SKFRY 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, SKF AB has a trailing twelve months PE ratio of 21.68, 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 22.48. While SKF AB’s current PE level puts it above its midpoint of 17.20 over the past five years, it 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 Industrial Products sector’s trailing twelve months PE ratio, which stands at 25.55. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that SKF AB has a forward PE ratio (price relative to this year’s earnings) of just 16.20, so it is fair to say that a slightly more value-oriented path may be ahead for SKF AB 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, SKF AB has a P/S ratio of about 1.28. This is much lower than the S&P 500 average, which comes in at 3.56 right now. This makes the stock undervalued from the P/S aspect too.
Broad Value Outlook
In aggregate, SKF AB currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes SKF AB a solid choice for value investors.
What About the Stock Overall?
Though SKF AB 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 D and a Momentum Score of F. This gives SKFRY 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 slightly discouraging. The full year estimate has seen one downward and no upward revision in the past 60 days. Thus, the full year estimate has inched lower by 2.2% over the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
AB SKF Price and Consensus
AB SKF Price and Consensus | AB SKF Quote
Nonetheless, the company has a solid long-term earnings growth rate of 13.9%, and it sports a Zacks Rank 32 (Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
SKF AB is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, this Zacks Rank #2 company enjoys a solid Zacks Industry Rank (among top 35% out of more than 250 industries). In fact, over the past two years, the industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
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