Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Is MasterCraft (MCFT) A Profitable Pick For Value Investors?

Published 07/10/2019, 09:35 PM
Updated 07/09/2023, 06:31 AM

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 MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) 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, MasterCraft has a trailing twelve months PE ratio of 7.84, 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 stands at about 18.50. If we focus on the long-term PE trend, MasterCraft’s current PE level puts it below its midpoint over the past three years.

Further, the stock’s PE compares favorably with the Zacks Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 22.16. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that MasterCraft has a forward PE ratio (price relative to this year’s earnings) of just 6.42, so it is fair to say that a slightly more value-oriented path may be ahead for MasterCraft stock in the near term too.

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, MasterCraft has a P/S ratio of about 0.86. This is lower than the S&P 500 average, which comes in at 3.33 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.

If anything, MCFT is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, MasterCraft currently has a Zacks Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes MasterCraft a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for MasterCraft is just 0.64, a level that is far lower than the industry average of 0.95. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio comes in at 8.62, which is lower than the industry average of 11.40. Clearly, MCFT is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though MasterCraft 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 A and a Momentum Score of F. This gives MCFT a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. This has had a notable impact on the consensus estimate though as the current quarter consensus estimate has decreased by 1.2% in the past two months, while the current year estimate has inched up by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

MasterCraft is an inspired choice for value investors, as it is hard to beat its incredible line up of statistics on this front.

However, with a sluggish industry rank (among bottom 27% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Leisure and Recreation Products industry has clearly underperformed the market at large, as you can see below:

So, value investors might want to wait for estimates, analyst sentiment and industry trends to turn favorable in this name first, but once that happens, this stock could be a compelling pick.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>



MASTERCRAFT BOAT HOLDINGS, INC. (MCFT): Free Stock Analysis Report

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.