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.
Should Value Investors Pick Bausch Health (BHC) Stock 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 Bausch Health Companies Inc. (BHC - 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, Bausch Health has a trailing twelve months PE ratio of 5.38, 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 23.05. If we focus on the long-term PE trend, Bausch Health’s current PE level puts it below its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 26.05. 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 Bausch Health has a forward PE ratio (price relative to this year’s earnings) of just 5.06, so it is fair to say that a slightly more value-oriented path may be ahead for Bausch Health 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, Bausch Health has a P/S ratio of about 1.04. This is lower than the S&P 500 average, which comes in at 4.79 right now. As we can see in the chart below, this is above the median for this stock in particular over the past few years.
Image Source: Zacks Investment Research
BHC is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Bausch Health 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 Bausch Health a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Bausch Health is 0.25, a level that is lower than the industry average of 0.55. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 2.59, which is far better than the industry average of 10.19. Clearly, BHC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Bausch Health 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 A. This gives BHC 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 mixed at best. The current quarter has not seen any estimate revisions in the past sixty days, while the full year estimate has seen zero upward and two downward revisions in the same time period.
As a result, the current quarter consensus estimate has been unchanged in the past two months, while the full year estimate has inched up by 0.8%. 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
Bausch Health 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 (among the bottom 9%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates, analyst sentiment and broader factors 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
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should Value Investors Pick Bausch Health (BHC) Stock 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 Bausch Health Companies Inc. (BHC - 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, Bausch Health has a trailing twelve months PE ratio of 5.38, 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 23.05. If we focus on the long-term PE trend, Bausch Health’s current PE level puts it below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 26.05. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Bausch Health has a forward PE ratio (price relative to this year’s earnings) of just 5.06, so it is fair to say that a slightly more value-oriented path may be ahead for Bausch Health 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, Bausch Health has a P/S ratio of about 1.04. This is lower than the S&P 500 average, which comes in at 4.79 right now. As we can see in the chart below, this is above the median for this stock in particular over the past few years.
BHC is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Bausch Health 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 Bausch Health a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Bausch Health is 0.25, a level that is lower than the industry average of 0.55. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 2.59, which is far better than the industry average of 10.19. Clearly, BHC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Bausch Health 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 A. This gives BHC 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 mixed at best. The current quarter has not seen any estimate revisions in the past sixty days, while the full year estimate has seen zero upward and two downward revisions in the same time period.
As a result, the current quarter consensus estimate has been unchanged in the past two months, while the full year estimate has inched up by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Bausch Health Cos Inc. Price and Consensus
Bausch Health Cos Inc. price-consensus-chart | Bausch Health Cos 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
Bausch Health 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 (among the bottom 9%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.