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 Perry Ellis International, Inc. (NASDAQ:PERY) 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, Perry Ellis has a trailing twelve months PE ratio of 11.4, 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 19.8. If we focus on the long-term PE trend, Perry Ellis’ current PE level puts it below its midpoint of 15.0 over the past five years. Also, the current level stands significantly below the highs for the stock, suggesting that it could be a superb time to enter.
Further, the stock’s PE compares favorably with the Zacks Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Perry Ellis has a forward PE ratio (price relative to this year’s earnings) of just 9.9, so it is fair to say that a slightly more value-oriented path may be ahead for Perry Ellis 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, Perry Ellis has a P/S ratio of about 0.4. This is way lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Perry Ellis 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 Perry Ellis a solid choice for value investors.
What About the Stock Overall?
Though Perry Ellis 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 F and a Momentum score of C. This gives PERY a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates for the current quarter and full year have not witnessed any revisions in the past sixty days. However, the current quarter consensus estimate has declined by 11.9% in the past two months, while the full year estimate has inched higher by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Perry Ellis International Inc. Price and Consensus
This indicates that while the company may face some near-term hurdles, its future prospects remain favorable. Thus, the stock sports a Zacks Rank #2 (Buy), which indicates why we are looking for outperformance from the company in future.
Bottom Line
Perry Ellis is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Apart from having a Zacks Rank #2, the company also flaunts a solid Zacks Industry Rank (Top 20% out of over 250 Zacks Industries).
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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Perry Ellis International Inc. (PERY): Free Stock Analysis Report
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