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 F.N.B. Corporation FNB 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, F.N.B. Corporation has a trailing twelve months PE ratio of 15.22, 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 20.06. If we focus on the stock’s long-term PE trend, the current level puts F.N.B. Corporation’s current PE ratio above its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Banks-Southeast industry’s trailing twelve months PE ratio, which stands at 17.98. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that F.N.B. Corporation has a forward PE ratio (price relative to this year’s earnings) of just 13.83, so it is fair to say that a slightly more value-oriented path may be ahead for F.N.B. Corporation stock in the near term too.
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, F.N.B. Corporation’s P/CF ratio of 12.73 is lower than the Zacks classified Banks-Southeastindustry average of 17.45, which indicates at the stock’s being undervalued compared to its peers from this respect as well.
Broad Value Outlook
In aggregate, F.N.B. Corporation 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 F.N.B. Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for F.N.B. Corporation is just 0.92, a level that is lower than the industry average of 1.47. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, FNB is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though F.N.B. Corporation 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 ‘F’ as well. These give FNB 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 much discouraging. The current year has seen one estimate going higher in the past sixty days compared to two lower, while the next year estimate has seen one upward and three downward movements in the same time period.
This has had a significant impact on the consensus estimate as the current year consensus estimate has fallen by 2% in the past two months and the full year estimate has gone down by 0.9%. 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) despite strong value metrics and why we are looking for in-line performance from the company in the near term
F.N.B. Corporation 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 22% out of more than 250 industries) further strengthens its future growth potential. In fact, over the past two years, the Zacks Banks-Southeast industry has clearly outperformed the broader market, as you can see below:
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.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>
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