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 Atlas Air Worldwide Holdings, Inc. AAWW 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, Atlas Air has a trailing twelve months PE ratio of 13.76, 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 19.86. If we focus on the stock’s long-term PE trend, the current level puts Atlas Air’s current PE ratio above its midpoint (which is 10.10) over the past five years, with the number having risen rapidly over the past few months. This suggests that the stock is overvalued compared to its historical levels.
However, the stock’s PE compares favorably with the Zacks classified Transport-Air Freight sector’s trailing twelve months PE ratio, which stands at 18.87. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Atlas Air has a forward PE ratio (price relative to this year’s earnings) of just 10.20, so it is fair to say that a slightly more value-oriented path may be ahead for Atlas Air 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, Atlas Air has a P/S ratio of about 0.73. This is lower than the S&P 500 average, which comes in at 2.97 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.
If anything, AAWW is near the middle 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, Atlas Air currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look.
Clearly, AAWW is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Atlas Air 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 ‘A’. This gives AAWW 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 current quarter has seen one estimate go higher in the past sixty days compared to none lower, while the full year estimate has seen two upward revisions and none downward in the same time period.
This has had a positive impact on the consensus estimate though, as the current quarter consensus estimate has risen by 16.1% in the past two months, while the full year estimate has inched higher by 1.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Atlas Air Worldwide Holdings Price and Consensus
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Atlas Air is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Atlas Air is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, its favorable industry rank (among the Top 34% of more than 250 industries) and positive analyst attention warrant a closer look. In fact, over the past two years, the Zacks Transportation – Air Freight and Cargo industry has clearly underperformed the broader market, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.
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