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Should Value Investors Buy Ethan Allen (ETH) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Ethan Allen (ETH). ETH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 12.22, while its industry has an average P/E of 17.68. Over the past 52 weeks, ETH's Forward P/E has been as high as 18.61 and as low as 10.94, with a median of 12.82.

ETH is also sporting a PEG ratio of 0.81. 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. ETH's industry currently sports an average PEG of 1.13. ETH's PEG has been as high as 1.54 and as low as 0.81, with a median of 1.08, all within the past year.

Another valuation metric that we should highlight is ETH's P/B ratio of 1.49. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 4.01. Over the past 12 months, ETH's P/B has been as high as 1.75 and as low as 1.19, with a median of 1.42.

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. ETH has a P/S ratio of 0.72. This compares to its industry's average P/S of 0.73.

Finally, our model also underscores that ETH has a P/CF ratio of 9.32. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. ETH's current P/CF looks attractive when compared to its industry's average P/CF of 11.65. Over the past 52 weeks, ETH's P/CF has been as high as 12.32 and as low as 8.18, with a median of 9.57.

These are only a few of the key metrics included in Ethan Allen'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, ETH looks like an impressive value stock at the moment.


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