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Should Value Investors Buy Big Lots (BIG) Stock?

Zacks Equity Research
Wix.com (WIX) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Big Lots (BIG) is a stock many investors are watching right now. BIG is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 9.88. This compares to its industry's average Forward P/E of 20.71. Over the past year, BIG's Forward P/E has been as high as 10.59 and as low as 6.27, with a median of 8.86.

Investors should also note that BIG holds a PEG ratio of 1.31. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. BIG's industry has an average PEG of 2.08 right now. Over the last 12 months, BIG's PEG has been as high as 1.40 and as low as 0.58, with a median of 0.83.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BIG has a P/S ratio of 0.28. This compares to its industry's average P/S of 0.65.

Finally, investors should note that BIG has a P/CF ratio of 5.48. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 19.64. Over the past year, BIG's P/CF has been as high as 7.61 and as low as 4.07, with a median of 6.26.

These are only a few of the key metrics included in Big Lots'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, BIG looks like an impressive value stock at the moment.


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