We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is ABM Industries a Suitable Stock for Value Investors Now?
Read MoreHide Full Article
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 ABM Industries Incorporated (ABM - 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, ABM Industries has a trailing twelve months PE ratio of 13, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25.2. If we focus on the long-term PE trend, ABM Industries’ current PE level puts it MUCH below its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 32.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that ABM Industries has a forward PE ratio (price relative to this year’s earnings) of just 12.8, so it is fair to say that a slightly more value-oriented path may be ahead for ABM Industries 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, ABM Industries has a P/S ratio of about 0.5. This is a lower than the S&P 500 average, which comes in at 5 right now. However, we can see in the chart below, this is above the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, ABM Industries currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes ABM Industries a solid choice for value investors.
What About the Stock Overall?
Though ABM Industries 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 Score of B and a Momentum Score of A. This gives ABM a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been discouraging. The current fiscal quarter has seen one estimate go higher while two estimates moved down in the past sixty days and the fiscal full year has seen two estimates go higher and one lower.
Thus, the consensus estimate for the current fiscal quarter has remained unchanged in the past two months, while the full fiscal year estimate has declined by 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish trend is why the stock has a Zacks Rank #3 (Hold) and why we are expecting in-line from the company in the near term.
Bottom Line
ABM Industries is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, sluggish industry rank (bottom 16%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the sector has underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for the broader factors and estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Shutterstock
Is ABM Industries a Suitable Stock for Value Investors Now?
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 ABM Industries Incorporated (ABM - 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, ABM Industries has a trailing twelve months PE ratio of 13, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25.2. If we focus on the long-term PE trend, ABM Industries’ current PE level puts it MUCH below its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 32.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that ABM Industries has a forward PE ratio (price relative to this year’s earnings) of just 12.8, so it is fair to say that a slightly more value-oriented path may be ahead for ABM Industries 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, ABM Industries has a P/S ratio of about 0.5. This is a lower than the S&P 500 average, which comes in at 5 right now. However, we can see in the chart below, this is above the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, ABM Industries currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes ABM Industries a solid choice for value investors.
What About the Stock Overall?
Though ABM Industries 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 Score of B and a Momentum Score of A. This gives ABM a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been discouraging. The current fiscal quarter has seen one estimate go higher while two estimates moved down in the past sixty days and the fiscal full year has seen two estimates go higher and one lower.
Thus, the consensus estimate for the current fiscal quarter has remained unchanged in the past two months, while the full fiscal year estimate has declined by 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
ABM Industries Incorporated Price and Consensus
ABM Industries Incorporated price-consensus-chart | ABM Industries Incorporated Quote
This bearish trend is why the stock has a Zacks Rank #3 (Hold) and why we are expecting in-line from the company in the near term.
Bottom Line
ABM Industries is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, sluggish industry rank (bottom 16%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the sector has underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for the broader factors and estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.