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 CommScope Holding Company, Inc. (NASDAQ:COMM) 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:
PE Ratio
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, CommScope Holding has a trailing twelve months PE ratio of 12.58, 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 18.21. Also, if we focus on the long-term PE trend, CommScope Holding’s current PE level puts it below its midpoint of 14.73 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 20.53. This indicates that the stock is quite undervalued right now, compared to its peers.
Also, CommScope Holding has a forward PE ratio (price relative to this year’s earnings) of 8.87, which is quite lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for CommScope Holding stock.
P/S Ratio
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, CommScope Holding has a P/S ratio of 1.11. 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, CommScope Holding currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes CommScope Holding a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for CommScope Holding is 2.22, a level that is lower than the industry average of 8.32x. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, COMM is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though CommScope Holding 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 D and a Momentum Score of A. This gives COMM 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 bullish. The current quarter has seen three upward versus no downward revision in the past sixty days, while the full year estimate has seen three upward versus two downward revisions in the same time period.
This has had a bullish impact on the consensus estimate as the current quarter consensus estimate has shot up 4.8% in the past two months, while the full year estimate has climbed 36.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish analyst sentiment is the reason why the stock sports a Zacks Rank #1 (Strong Buy) and it is the reason why we are looking for outperformance from the company in the near term.
Bottom Line
CommScope Holding is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a pretty strong industry rank (among Top 2% of more than 250 industries) and a Zacks Rank #1, instill investors’ confidence in the stock.
However, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
We believe, despite an unsatisfactory past industry performance, a very strong industry and Zacks rank signal that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in COMM.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
CommScope Holding Company, Inc. (COMM): Free Stock Analysis Report
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