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 Apollo Global Management, Llc APO 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, Apollo Global has a trailing twelve months PE ratio of 9.89, 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 19.88. If we focus on the stock’s long-term PE trend, the current level puts Apollo Global’s current PE ratio above its midpoint over the past five years, with the number having trended somewhat upwards over the past few months.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Finance-Investment Management sub-industry’s trailing twelve months PE ratio, which stands at 15.43. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Apollo Global has a forward PE ratio (price relative to this year’s earnings) of just 10.39, so it is fair to say that a slightly more value-oriented path may be ahead for Apollo Global 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, Apollo Global has a P/S ratio of about 2.19. This is lower than the S&P 500 average, which comes in at 3.25 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, APO is almost 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, Apollo Global 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 Apollo Global a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Apollo Global is just 1.04, a level that is lower than the industry average of 1.59. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.
What About the Stock Overall?
Though Apollo Global 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 APO 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 have been favorable. The current quarter has seen three estimates go higher in the past sixty days compared to no lower, while the full year estimate has seen seven up compared to no movement in the opposite direction over the same time period.
This has had a substantial impact on the consensus estimate, as the current quarter consensus estimate has risen by 16.7% in the past two months, while the full year estimate has jumped 12.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Apollo Global is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a sluggish industry rank (among the bottom 43%) it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks classified Finance-Investment Management has clearly underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good Zacks rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Apollo Global.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research