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Is Interface (TILE) Worth Considering For a Value Buy Right Now?

Zacks

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 Interface, Inc. TILE 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, Interface has a trailing twelve months PE ratio of 17.52, 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 19.86. If we focus on the long-term PE trend, Interface’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.

Further, the stock’s PE also compares favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 25.10. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Interface has a forward PE ratio (price relative to this year’s earnings) of just 15.83, so it is fair to say that a slightly more value-oriented path may be ahead for Interface 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, Interface has a P/S ratio of about 1.24. This is a quite 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 somewhat below the highs and near the median zone for this stock in particular over the past few years.

If anything, this suggests some level of undervalued trading for TILE—at least compared to historical norms.

Broad Value Outlook

In aggregate, Interface 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 Interface a solid choice for value investors.

What About the Stock Overall?

Though Interface 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 ‘B’ and a Momentum score of ‘F’. This gives TILE 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 trending down. The current quarter has seen no estimate go higher in the past sixty days compared to two lower, while the full year estimate has seen no up and two downward revisions in the same time period.

This has had a significant impact on the consensus estimate though as the current quarter consensus estimate has dropped by 11.5% in the past two months, while the full year estimate has inched lower by 2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Interface, Inc. Price and Consensus

Interface, Inc. Price and Consensus | Interface, Inc. Quote

This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term

Bottom Line

Interface is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the Bottom 22%) and a Zacks Rank #3, it is hard to get too excited about this company overall.

So, given the negative trend in earnings estimate revisions, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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