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Is EVERTEC (EVTC) a Good Stock for Value Investors?
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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 EVERTEC, Inc. (EVTC - 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, EVERTEC has a trailing twelve months PE ratio of just 10.03, 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 20.38. If we focus on the stock’s long-term PE trend, the current level puts EVERTEC’s current PE ratio below its midpoint over the past three years, with the number having risen over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Financial Transaction Services industry’s trailing twelve months PE ratio, which stands at 25.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that EVERTEC has a forward PE ratio (price relative to this year’s earnings) of 10.88, lower than the industry average of 19.33, indicating the stock is expected to remain undervalued compared to its peers.
P/CF Ratio
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, EVERTEC’s P/CF ratio of 8.95 is lower than the Zacks classified Financial Transaction Services industry average of 19.91, which indicates that the stock is undervalued in this respect too.
PEG Ratio
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.
EVERTEC’s PEG ratio stands at just 1.01, compared with the Zacks Financial Transaction Services industry average of 1.58. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, EVERTEC 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 EVERTEC a solid choice for value investors.
What About the Stock Overall?
Though EVERTEC 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 EVTC 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 two estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen one up and five down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 2.6% in the past two months, while the full year estimate has decreased by 3.6%. 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
EVERTEC 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 24% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past two years, the Zacks Financial Transaction Services industry has clearly 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.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>
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Is EVERTEC (EVTC) a Good 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 EVERTEC, Inc. (EVTC - 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, EVERTEC has a trailing twelve months PE ratio of just 10.03, 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 20.38. If we focus on the stock’s long-term PE trend, the current level puts EVERTEC’s current PE ratio below its midpoint over the past three years, with the number having risen over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Financial Transaction Services industry’s trailing twelve months PE ratio, which stands at 25.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that EVERTEC has a forward PE ratio (price relative to this year’s earnings) of 10.88, lower than the industry average of 19.33, indicating the stock is expected to remain undervalued compared to its peers.
P/CF Ratio
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, EVERTEC’s P/CF ratio of 8.95 is lower than the Zacks classified Financial Transaction Services industry average of 19.91, which indicates that the stock is undervalued in this respect too.
PEG Ratio
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.
EVERTEC’s PEG ratio stands at just 1.01, compared with the Zacks Financial Transaction Services industry average of 1.58. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, EVERTEC 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 EVERTEC a solid choice for value investors.
What About the Stock Overall?
Though EVERTEC 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 EVTC 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 two estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen one up and five down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 2.6% in the past two months, while the full year estimate has decreased by 3.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Evertec, Inc. Price and Consensus
Evertec, Inc. Price and Consensus | Evertec, 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.
Bottom Line
EVERTEC 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 24% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past two years, the Zacks Financial Transaction Services industry has clearly 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.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with
jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>