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 Universal Forest Products, Inc. (UFPI Quick QuoteUFPI - 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, Universal Forest Products has a trailing twelve months PE ratio of 19.83, 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 stands at about 20.36. If we focus on the long-term PE trend, Universal Forest Products’ current PE level puts it below its midpoint of 21.39 over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it could be a solid entry point.



However, the stock’s PE stands little above the Zacks classified Construction sector’s trailing twelve months PE ratio, which stands at 19.47. This indicates that the stock is slightly overvalued right now, compared to its peers.



We should also point out that Universal Forest Products has a forward PE ratio (price relative to this year’s earnings) of just 16.82, so it is fair to say that a slightly more value-oriented path may be ahead for Universal Forest Products stock in the near term too.

P/S 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, Universal Forest Products has a P/S ratio of about 0.62. This is significantly lower than the S&P 500 average, which comes in at 3.09 right now. Also, as we can see in the chart below, this lies below the highs for this stock in particular over the past few years.



Broad Value Outlook

In aggregate, Universal Forest Products 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 Universal Forest Products a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Universal Forest Products is just 1.68, a level that is far lower than the industry average of 3.27. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.

What About the Stock Overall?

Though Universal Forest Products 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 ‘D’. This gives UFPI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Notably, the company’s recent earnings estimates have been quite encouraging, as both the current quarter and full year have seen one estimate go higher in the past sixty days, compared to no downward revisions.

This has had a positive impact on the consensus estimate, as the current quarter consensus estimate has risen by 5.1% in the past two months, while the full year estimate has increased 0.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

Granted, Universal Forest Products is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Apart from having a favorable Zacks Rank, the company also flaunts an impressive industry rank (Top 24% out of over 250 industries). In fact, over the past one year, the Zacks categorized Building Products – Wood industry has clearly outperformed the broader market, as you can see below:



So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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