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 VWR Corporation 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, VWR Corp. has a trailing twelve months PE ratio of 14.51, 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 19.84. If we focus on the stock’s long-term PE trend, the current level puts VWR’s current PE ratio slightly below its midpoint over the past two years, which currently stands at 15.90. Moreover, the current level is comparatively below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Medical/Dental Supplies industry’s trailing twelve months PE ratio, which stands at 16.84. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that VWR Corp. has a forward PE ratio (price relative to this year’s earnings) of 14.65, so it is fair to expect a slight increase in the company’s share price in the near future.
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, VWR Corp. has a P/S ratio of about 0.74. This is a quite low compared to the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past two years.
If anything, VWR is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, VWR’s P/CF ratio of 10.89 is lower than the Zacks classified Medical/Dental Supplies industry average of 11.77, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, VWR 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 VWR a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for VWR is just 1.53, a level that is lower than the industry average of 1.82. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, VWR is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though VWR 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 ‘B’ and a Momentum score of ‘B’. This gives VWR 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 seen three estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen one upward revisions and two downward in the same time period.
This has had a small impact on the consensus estimate though as the current quarter consensus estimate has dipped by 2.2% in the past two months, while the full year estimate has inched down by 0.6%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
VWR CORP Price and Consensus
Bottom Line
VWR 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 (bottom 15% out of 265 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Medical/Dental Supplies industry has clearly underperformed the broader market, as you can see below:
So, 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.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
Image: Bigstock
Can VWR Corp. be a Top Choice 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 VWR Corporation 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, VWR Corp. has a trailing twelve months PE ratio of 14.51, 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 19.84. If we focus on the stock’s long-term PE trend, the current level puts VWR’s current PE ratio slightly below its midpoint over the past two years, which currently stands at 15.90. Moreover, the current level is comparatively below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Medical/Dental Supplies industry’s trailing twelve months PE ratio, which stands at 16.84. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that VWR Corp. has a forward PE ratio (price relative to this year’s earnings) of 14.65, so it is fair to expect a slight increase in the company’s share price in the near future.
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, VWR Corp. has a P/S ratio of about 0.74. This is a quite low compared to the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past two years.
If anything, VWR is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, VWR’s P/CF ratio of 10.89 is lower than the Zacks classified Medical/Dental Supplies industry average of 11.77, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, VWR 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 VWR a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for VWR is just 1.53, a level that is lower than the industry average of 1.82. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, VWR is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though VWR 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 ‘B’ and a Momentum score of ‘B’. This gives VWR 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 seen three estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen one upward revisions and two downward in the same time period.
This has had a small impact on the consensus estimate though as the current quarter consensus estimate has dipped by 2.2% in the past two months, while the full year estimate has inched down by 0.6%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
VWR CORP Price and Consensus
VWR CORP Price and Consensus | VWR CORP Quote
Bottom Line
VWR 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 (bottom 15% out of 265 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Medical/Dental Supplies industry has clearly underperformed the broader market, as you can see below:
So, 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.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>