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Should Value Investors Buy Fresenius (FMS) Stock?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is Fresenius (FMS). FMS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 13.92, while its industry has an average P/E of 32.21. Over the past 52 weeks, FMS's Forward P/E has been as high as 17.28 and as low as 11.91, with a median of 14.49.

We should also highlight that FMS has a P/B ratio of 1.47. 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 solid versus its industry's average P/B of 3.90. Over the past year, FMS's P/B has been as high as 1.79 and as low as 1.25, with a median of 1.52.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FMS has a P/S ratio of 1.13. This compares to its industry's average P/S of 3.37.

Finally, our model also underscores that FMS has a P/CF ratio of 7.45. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. FMS's current P/CF looks attractive when compared to its industry's average P/CF of 22.53. Over the past 52 weeks, FMS's P/CF has been as high as 9.03 and as low as 5.98, with a median of 7.46.

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


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