Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put MKS Instruments, Inc. MKSI stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, MKS Instruments has a trailing twelve months PE ratio of 12.89, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 18.24. Also, if we focus on the long-term PE trend, MKS Instruments’ current PE level puts it way below its midpoint of 18.22 over the past five years.
Further, the stock’s PE compares quite favorably with the Computer and Technology Market’s trailing twelve months PE ratio, which stands at 20.47. This indicates that the stock is quite undervalued right now, compared to its peers.
However, MKS Instruments has a forward PE ratio (price relative to this year’s earnings) of 15.93, which is higher than the current level. So, it is fair to expect an increase in the share price in the times ahead.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, MKS Instruments has a P/S ratio of 2.65. This is lower than the S&P 500 average, which comes in at 3.32 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, MKS Instruments currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes MKS Instruments a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for MKS Instruments is 1.33, a level that is lower than the industry average of 1.82x. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, MKSI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though MKS Instruments might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of F. This gives MKSI a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one upward and one downward revision in the past sixty days, while the full year estimate has seen one upward versus one downward revision in the same time period.
This has had a mixed impact on the consensus estimate as the current quarter consensus estimate has dipped 1.8% in the past two months, while the full year estimate has inched up 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
MKS Instruments, Inc. Price and Consensus
MKS Instruments, Inc. Price and Consensus | MKS Instruments, Inc. Quote
This mixed analyst sentiment is the reason why the stock has a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
MKS Instruments is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among Bottom 12% of more than 250 industries) and a Zacks Rank #3 it hard to get too excited about the stock.
However, over the past two years, the broader industry has clearly outperformed the market at large, as you can see below:
So, despite a satisfactory past industry performance, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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MKS Instruments, Inc. (MKSI) : Free Stock Analysis Report
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