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Should Value Investors Buy Fresenius (FMS) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 Fresenius (FMS). FMS is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 12.65, while its industry has an average P/E of 31.33. Over the last 12 months, FMS's Forward P/E has been as high as 17.28 and as low as 11.91, with a median of 14.55.

FMS is also sporting a PEG ratio of 2.15. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FMS's industry currently sports an average PEG of 2.59. Over the last 12 months, FMS's PEG has been as high as 2.78 and as low as 1.33, with a median of 2.24.

Investors should also recognize that FMS has a P/B ratio of 1.38. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. FMS's current P/B looks attractive when compared to its industry's average P/B of 3.62. Over the past year, FMS's P/B has been as high as 1.84 and as low as 1.25, with a median of 1.54.

Finally, we should also recognize that FMS has a P/CF ratio of 7.42. 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. FMS's current P/CF looks attractive when compared to its industry's average P/CF of 19.83. Within the past 12 months, FMS's P/CF has been as high as 9.04 and as low as 5.99, with a median of 7.55.

Value investors will likely look at more than just these metrics, but the above data helps show that Fresenius is likely undervalued currently. And when considering the strength of its earnings outlook, FMS sticks out at as one of the market's strongest value stocks.


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