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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 Autoliv, Inc. (ALV - Free Report) 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, Autoliv has a trailing twelve months PE ratio of 15.91. This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.93.
If we focus on the long-term PE trend, Autoliv’s current PE level puts it above its midpoint of 16.05 over the past five years. Moreover, the current level stands well below the highs for this stock, suggesting it might be a good entry point.
However, the stock’s PE also compares unfavorably with the Zacks classified Auto-Tires-Trucks sector’s trailing twelve months PE ratio, which stands at 10.96. This indicates that the stock is somewhat overvalued right now, compared to its peers.
We should also point out that Autoliv has a forward PE ratio (price relative to this year’s earnings) of 16.19, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Nonetheless, 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, Autoliv has a P/S ratio of about 1.00. This stands well below the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading for ALV—at least compared to historical norms.
Broad Value Outlook
In aggregate, Autoliv 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 Autoliv a decent choice for value investors.
What About the Stock Overall?
Though Autoliv 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 ‘C’ and a Momentum score of ‘B’. This gives ALV 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 mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward and no downward revisions in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has slipped by 1.6% in the past two months, while the full year estimate has inched up by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed 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.
Bottom Line
Autoliv is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 29% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Auto/Truck – Original Equipment industry has clearly underperformed 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.
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Is Autoliv 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 Autoliv, Inc. (ALV - Free Report) 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, Autoliv has a trailing twelve months PE ratio of 15.91. This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.93.
If we focus on the long-term PE trend, Autoliv’s current PE level puts it above its midpoint of 16.05 over the past five years. Moreover, the current level stands well below the highs for this stock, suggesting it might be a good entry point.
However, the stock’s PE also compares unfavorably with the Zacks classified Auto-Tires-Trucks sector’s trailing twelve months PE ratio, which stands at 10.96. This indicates that the stock is somewhat overvalued right now, compared to its peers.
We should also point out that Autoliv has a forward PE ratio (price relative to this year’s earnings) of 16.19, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Nonetheless, 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, Autoliv has a P/S ratio of about 1.00. This stands well below the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading for ALV—at least compared to historical norms.
Broad Value Outlook
In aggregate, Autoliv 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 Autoliv a decent choice for value investors.
What About the Stock Overall?
Though Autoliv 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 ‘C’ and a Momentum score of ‘B’. This gives ALV 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 mixed at best. The current quarter has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward and no downward revisions in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has slipped by 1.6% in the past two months, while the full year estimate has inched up by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Autoliv, Inc. Price and Consensus
Autoliv, Inc. Price and Consensus | Autoliv, Inc. Quote
This somewhat mixed 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.
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Bottom Line
Autoliv is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 29% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Auto/Truck – Original Equipment industry has clearly underperformed 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.
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 >>