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 Primerica, Inc. PRI 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, Primerica has a trailing twelve months PE ratio of 18.23, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.27. If we focus on the stock’s long-term PE trend, the current level puts Primerica’s current PE ratio much above its midpoint (which is 13.79) over the past five years.
However, the stock’s PE compares unfavorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 15.44. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should point out that Primerica has a forward PE ratio (price relative to this year’s earnings) of just 15.46, so it is fair to say that a slightly more value-oriented path may be ahead for Primerica stock in the near term too.
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, Primerica has a P/S ratio of about 2.53. This is somewhat lower than the S&P 500 average, which comes in at 3.07 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
If anything, Primerica is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Primerica currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes PRI a solid choice for value investors.
What About the Stock Overall?
Though Primerica 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 grade of ‘C’ and a Momentum score of ‘D’. This gives PRI 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 encouraging. The full-year 2017 has seen three estimates go higher in the past sixty days, compared to none lower, while the full-year 2018 estimate has seen one upward revision and no downward revision in the same time period.
This has had a favorable impact on the consensus estimate, as the full-year 2017 consensus estimate has risen by 2.3% in the past two months, while the full-year 2018 estimate has increased 6.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Primerica, Inc. Price and Consensus
Primerica, Inc. Price and Consensus | Primerica, Inc. Quote
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Primerica is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (top 23% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. In fact, over the past one year, the Zacks Life Insurance sector has significantly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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