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 go unnoticed and are compelling buys, or that offer tempting discounts from their fair value?

One way to find these companies is to look at several key financial metrics and ratios, many of which are crucial in the value-oriented stock selection process. let’s say PACCAR Inc. PCAR stock in this equation and find out if it’s a good fit for value investors right now, or if investors subscribing to this methodology should look elsewhere for the best picks:

P/E ratio

A key metric that value investors always look at is the price-to-earnings ratio, or PE for short. It tells us how much investors are willing to pay for every dollar of profit from a given stock, and it’s 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 that ratio has been in the past; b) how it compares to the industry/sector average; and c) how it compares to the market as a whole.

On this front, PACCAR has a year-over-year PE ratio of 15.52, as you can see in the chart below:

Image source: Zacks Investment Research

This level actually compares quite favorably to the market as a whole, as the PE of the S&P 500 sits at around 21.37. If we focus on the long-term trend of the PE, the current level of PACCAR’s PE places it below its midpoint over the past five years.

Zacks Investment Research
Image source: Zacks Investment Research

Additionally, the stock’s PE compares favorably to the Zacks Auto, Tires and Trucks sector’s year-over-year PE ratio of 23.06. If nothing else, this indicates that the stock is currently relatively undervalued compared to its peers.

Zacks Investment Research
Image source: Zacks Investment Research

We should also point out that PACCAR has a forward PE ratio (price to earnings this year) of just 12.23, so it’s fair to say that a slightly more value-oriented trajectory may be ahead for the company. PACCAR stock in the short term as well.

P/S ratio

Another key metric to note is the price-to-sales ratio. This approach compares the price of a given stock to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused metrics because it looks at sales, which is much harder to manipulate with accounting tricks than profits.

Currently, PACCAR has a P/S ratio of about 1.22. That’s below the S&P 500 average, which currently sits at 4.59. Also, as we can see in the chart below, this is below the highs for this particular stock in the past few years.

Zacks Investment Research
Image source: Zacks Investment Research

On the contrary, PCAR is at the lower end of its range over the period from a P/S metric, suggesting some level of undervalued trading, at least by historical standards.

Overall value outlook

Overall, PACCAR currently has a Zacks value score of A, which puts it in the top 20% of all stocks we cover from this look. This makes PACCAR a solid choice for value investors.

What about the overall stock?

Although PACCAR may be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it’s worth noting that the company has a Growth score of F and a Momentum score of C. This gives PCAR a Zacks VGM score – or its overall fundamental score – of A. (You can read more on Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been disappointing. The current year has seen five estimates rise in the past sixty days against three declines, while the estimate for the whole of 2021 has seen three revisions up against one fall in the past year. same period.

This had a negative impact on the consensus estimate, as the consensus estimate for the current year improved by 19.7% over the past two months, while the estimate for the whole of he year 2021 increased by 1.4%. You can see the trend of the consensus estimate and the recent price action of the stock in the chart below:

PACCAR Inc. Pricing and Consensus

PACCAR Inc. Pricing and Consensus

PACCAR Inc. price-consensus-table | PACCAR Inc. Quote

Despite analysts’ bearish sentiments, the stock holds a Zacks rank of No. 3 (holding). Thus, we are looking for online performance from the company in the short term.

Conclusion

PACCAR is an inspired choice for value investors, as it’s hard to beat its incredible lineup of stats on this front. In fact, over the past two years, the Zacks Automotive – Domestic industry has clearly outperformed the market as a whole, as you can see below:

Zacks Investment Research
Image source: Zacks Investment Research

However, with a sluggish industry ranking (among the bottom 22% of over 250 industries) and a #3 Zacks ranking, it’s hard to get too excited about this company as a whole.

So, value investors may want to wait for analyst estimates and sentiment to turn around on this name first, but once that does, this stock could be a compelling choice.

Zacks names ‘only one best choice for doubling up’

From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.

It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.

This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.