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, 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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Textron (TXT) is a stock many investors are watching right now. TXT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 13.39 right now. For comparison, its industry sports an average P/E of 22.13. Over the past 52 weeks, TXT's Forward P/E has been as high as 17.68 and as low as 11.81, with a median of 13.64.
Investors will also notice that TXT has a PEG ratio of 1.14. 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 PEG compares to its industry's average PEG of 1.89. Over the past 52 weeks, TXT's PEG has been as high as 1.40 and as low as 0.98, with a median of 1.16.
Investors should also recognize that TXT has a P/B ratio of 2.14. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. TXT's current P/B looks attractive when compared to its industry's average P/B of 3.29. Over the past year, TXT's P/B has been as high as 2.27 and as low as 1.78, with a median of 2.11.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TXT has a P/S ratio of 1.11. This compares to its industry's average P/S of 1.39.
Finally, investors should note that TXT has a P/CF ratio of 11.45. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 21.78. Over the past 52 weeks, TXT's P/CF has been as high as 12.70 and as low as 10.21, with a median of 11.55.
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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Textron Inc. (TXT) : Free Stock Analysis Report
