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 Jacobs Engineering Group Inc. 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, Jacobs Engineering has a trailing twelve months PE ratio of 18.55, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.36. If we focus on the stock’s long-term PE trend, the current level puts JEC’s PE ratio above its midpoint over the past five years with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares pretty favorably with the Zacks classified construction sector’s trailing twelve months PE ratio, which stands at 19.47. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that JEC has a forward PE ratio (price relative to this year’s earnings) of 17.84, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term.
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, Jacobs Engineering has a P/S ratio of about 0.63. This is a bit 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 is towards the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, JEC 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 JEC a good choice for value investors, and some of its other key metrics make this pretty clear too.
What About the Stock Overall?
Though Jacobs Engineering 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 ‘D’ and a Momentum score of ‘C’. This gives JEC a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been discouraging. The current quarter has seen one estimates go higher in the past 60 days and five lower, while the full year estimate has also seen one upward revisions and five downward revisions in the same time frame.
As a result, the current quarter consensus estimate has dipped by 5.3% in the past two months, while the full year estimate has dropped by about 0.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Jacobs Engineering Group Inc. Price and Consensus
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite good value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
JEC is an inspired choice for value investors, as it is hard to beat its good lineup of statistics on this front. With a good industry rank (Top 39% out of more than 265 industries) Jacobs Engineering looks like a strong value contender. In fact, over the past one year, the Zacks Engineering R&D Services industry has clearly outperformed the broader market, as you can see below:
However, 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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Will Jacobs Engineering Prove to be a Suitable Value Pick?
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 Jacobs Engineering Group Inc. 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, Jacobs Engineering has a trailing twelve months PE ratio of 18.55, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.36. If we focus on the stock’s long-term PE trend, the current level puts JEC’s PE ratio above its midpoint over the past five years with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares pretty favorably with the Zacks classified construction sector’s trailing twelve months PE ratio, which stands at 19.47. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that JEC has a forward PE ratio (price relative to this year’s earnings) of 17.84, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term.
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, Jacobs Engineering has a P/S ratio of about 0.63. This is a bit 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 is towards the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, JEC 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 JEC a good choice for value investors, and some of its other key metrics make this pretty clear too.
What About the Stock Overall?
Though Jacobs Engineering 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 ‘D’ and a Momentum score of ‘C’. This gives JEC a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been discouraging. The current quarter has seen one estimates go higher in the past 60 days and five lower, while the full year estimate has also seen one upward revisions and five downward revisions in the same time frame.
As a result, the current quarter consensus estimate has dipped by 5.3% in the past two months, while the full year estimate has dropped by about 0.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Jacobs Engineering Group Inc. Price and Consensus
Jacobs Engineering Group Inc. Price and Consensus | Jacobs Engineering Group Inc. Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite good value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
JEC is an inspired choice for value investors, as it is hard to beat its good lineup of statistics on this front. With a good industry rank (Top 39% out of more than 265 industries) Jacobs Engineering looks like a strong value contender. In fact, over the past one year, the Zacks Engineering R&D Services industry has clearly outperformed the broader market, as you can see below:
However, 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.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>