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Is LG Display (LPL) a Great Stock for Value Investors?


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 LG Display Co., Ltd. LPL 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, LG Display has a trailing twelve months PE ratio of 4.1, as you can see below:

This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at 20.7. If we focus on the long-term trend of the stock, the current level puts LPL below its midpoint over the past five years. Also it is well below the highs over the past five years, suggesting it might be a good entry point.

Further, the stock’s PE also compares favorably with the Computer – Peripheral Equipment industry’s trailing twelve months PE ratio, which stands at 8.2. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that LG Display has a forward PE ratio (price relative to this year’s earnings) of 5.1 – which is higher than the current figure. So it is fair to expect an increase in the company’s share price in the near future.

PS 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, LG Display has a P/S ratio of 0.4. This is significantly lower than the S&P 500 average, which comes in at 3.4 right now. In fact, the stock has always been relatively undervalued compared to the industry, in this respect.

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

Broad Value Outlook

In aggregate, LG Display 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 LG Display an apt choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for LG Display is just 0.4, a level that is far lower than the industry average of 2.9. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 2.6, which is far better than the industry average of 14.5. Clearly, LPL is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though LG Display 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 A and a Momentum score of C. This gives LPL a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been trending downwards lately. The current year and next has seen no estimates go higher in the past thirty days compared to one lower.

As a result, the current year consensus estimate has dropped by 1.5% in the past month, while the next year estimate has decreased 12.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

LG Display Co., Ltd. Price and Consensus

LG Display Co., Ltd. Price and Consensus | LG Display Co., Ltd. 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

LG Display is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. It forms a part of the Computer – Peripheral Equipment industry, which ranks among the Top 43% out of more than 250 industries. However, the industry has underperformed the broader market over the past six months, as you can see below:

Also, with a Zacks Rank #3, it is hard to get too excited about this company overall. 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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