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Is The Bank Of New York Mellon (BK) a Good Pick 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 The Bank Of New York Mellon (BK - 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, The Bank Of New York Mellon has a trailing twelve months PE ratio of 9.26, 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 20.66. If we focus on the long-term PE trend, The Bank Of New York Mellon’s current PE level puts it below its midpoint (which is 11.31) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 14.78. 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 The Bank Of New York Mellon has a forward PE ratio (price relative to this year’s earnings) of just 9.41, which is higher than the current level. So, it is fair to expect an increase in the company’s share price 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, The Bank Of New York Mellon has a P/S ratio of about 1.55. This is a bit lower than the S&P 500 average, which comes in at 3.83x right now. Also, as we can see in the chart below, this is well below 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, The Bank Of New York Mellon currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes The Bank Of New York Mellon a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for The Bank Of New York Mellon is just 1.18, a level that is far lower than the industry average of 1.22. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, BK is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though The Bank Of New York Mellon 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 D and a Momentum Score of A. This gives BK 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 robust at best. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen three up and two down in the same time period.
This has had a noticeable impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.8% in the past two months, while the full year estimate has inched higher by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The Bank of New York Mellon Corporation Price and Consensus
Even though Western Union has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
The Bank Of New York Mellon 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 Bottom 16% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. However, over the past two years, the Zacks Banks - Major Regional industry has clearly underformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for analyst sentiment and broader factors to turn favorable in this name first, but once that happen, this stock could be a compelling pick.
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Is The Bank Of New York Mellon (BK) a Good Pick 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 The Bank Of New York Mellon (BK - 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, The Bank Of New York Mellon has a trailing twelve months PE ratio of 9.26, 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 20.66. If we focus on the long-term PE trend, The Bank Of New York Mellon’s current PE level puts it below its midpoint (which is 11.31) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 14.78. 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 The Bank Of New York Mellon has a forward PE ratio (price relative to this year’s earnings) of just 9.41, which is higher than the current level. So, it is fair to expect an increase in the company’s share price 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, The Bank Of New York Mellon has a P/S ratio of about 1.55. This is a bit lower than the S&P 500 average, which comes in at 3.83x right now. Also, as we can see in the chart below, this is well below 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, The Bank Of New York Mellon currently has a Value Score of B, putting it into the top 40% of all stocks we
cover from this look. This makes The Bank Of New York Mellon a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for The Bank Of New York Mellon is just 1.18, a level that is far lower than the industry average of 1.22. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, BK is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though The Bank Of New York Mellon 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 D and a Momentum Score of A. This gives BK 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 robust at best. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen three up and two down in the same time period.
This has had a noticeable impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.8% in the past two months, while the full year estimate has inched higher by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The Bank of New York Mellon Corporation Price and Consensus
The Bank of New York Mellon Corporation price-consensus-chart | The Bank of New York Mellon Corporation Quote
Even though Western Union has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
The Bank Of New York Mellon 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 Bottom 16% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. However, over the past two years, the Zacks Banks - Major Regional industry has clearly underformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for analyst sentiment and broader factors to turn favorable in this name first, but once that happen, this stock could be a compelling pick.