Should Value Investors Buy Textron (TXT) Stock?
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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
One company to watch right now is Textron (TXT). TXT is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 16.68 right now. For comparison, its industry sports an average P/E of 23.22. Over the past year, TXT's Forward P/E has been as high as 18.19 and as low as 13.22, with a median of 15.65.
Investors should also note that TXT holds a PEG ratio of 1.23. 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. TXT's industry has an average PEG of 2.05 right now. Over the past 52 weeks, TXT's PEG has been as high as 1.55 and as low as 0.60, with a median of 1.16.
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. TXT has a P/S ratio of 1.23. This compares to its industry's average P/S of 1.61.
Value investors will likely look at more than just these metrics, but the above data helps show that Textron is likely undervalued currently. And when considering the strength of its earnings outlook, TXT sticks out at as one of the market's strongest value stocks.
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