Is UPM-Kymmene (UPMKY) a Suitable Pick 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 UPM-Kymmene Oyj UPMKY 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, UPM-Kymmene has a trailing twelve months PE ratio of 14.9. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.8.
If we focus on the long-term trend of the stock, the current level puts UPM-Kymmene’s current PE above its median over the observed period (which stands at 12.4x). Hence, we could infer that the stock is overvalued in this respect, especially in light of its historical trend.
Nevertheless, the stock’s PE compares favorably with its industry’s trailing twelve months PE ratio, which stands at 21.7. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS 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, UPM-Kymmene has a P/S ratio of about 1.4. This is slightly higher than the industry average, which comes in at 1.3x right now.
UPMKY is actually in the highest zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, UPM-Kymmene 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 UPM-Kymmene an apt choice for value investors, and its above listed metrics make this pretty clear too.
What About the Stock Overall?
Though UPM-Kymmene 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 C and a Momentum score of D. This gives UPMKY 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 trending upward lately. The current year has seen one estimate go higher in the past thirty days compared to none lower, while the next year estimate has seen two upward revisions and no downward revision in the same time period.
This has had a small impact on the consensus estimate though, as the current year consensus estimate has inched up 0.5% in the past month, while the next year estimate has increased 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
UPM-Kymmene Corp. Price and Consensus
UPM-Kymmene Corp. Price and Consensus | UPM-Kymmene Corp. 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
UPM-Kymmene is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 34% out of more than 25 industries) and strong Zacks Rank, UPM-Kymmene looks like a strong value contender.
In fact, over the past year, the industry it belongs to has clearly outperformed the broader market, 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.
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