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 Jones Lang LaSalle Incorporated JLL 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, Jones Lang LaSalle has a trailing twelve months PE ratio of 14.19, 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 20.08. If we focus on the stock’s long-term PE trend, the current level puts Jones Lang LaSalle’s current PE ratio below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Real Estate Operations industry’s trailing twelve months PE ratio, which stands at 20.51. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Jones Lang LaSalle has a forward PE ratio (price relative to this year’s earnings) of just 13.71, so it is fair to say that a slightly more value-oriented path may be ahead for Jones Lang LaSalle 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, Jones Lang LaSalle has a P/S ratio of about 0.77. This is much lower than the S&P 500 average, which comes in at 3.28 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, JLL 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.
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Jones Lang LaSalle’s PEG ratio stands at just 1.21, compared with the Zacks Real Estate Operations industry average of 1.73. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Jones Lang LaSalle currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Jones Lang LaSalle a solid choice for value investors.
What About the Stock Overall?
Though Jones Lang LaSalle 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 JLL 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 declining. The current quarter has seen no estimate go higher in the past sixty days compared to one lower, while the full year estimate has seen one up and three down in the same time period.
This has had a significant impact on the consensus estimate though as the current quarter consensus estimate has fallen by 15.8% in the past two months, while the full year estimate has declined by 6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative 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.
Jones Lang LaSalle is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 38% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past two years, the Zacks Real Estate Operations industry has outperformed the broader market, as you can see below:
However, a Zacks Rank #3 indicates analysts have some apprehensions about the stock in the immediate future. So, 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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