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 DSW 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, DSW Inc. has a trailing twelve months PE ratio of 14.85, as you can see in the chart below:
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This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.92. If we focus on the long-term PE trend, DSW Inc’s current PE is below its mid point level over the past five years. Moreover, the current level is below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
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Furthermore, the stock’s PE also compares favorably with the Zacks classified Retail– Apparel/Shoes industry’s trailing twelve months PE ratio, which stands at 14.92. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
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However, we should also point out that DSW Inc. has a forward PE ratio (price relative to this year’s earnings) of 14.38, which is roughly in line with the current level. Hence the forward earnings estimates are already incorporated in the company’s current share price.
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, DSW Inc. has a P/S ratio of about 0.63. This is much lower than the S&P 500 average, which comes in at 2.98 right now. However, as we can see in the chart below, this is somewhat around the lows for this stock in particular over the past few years.
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If anything, DSW Inc. is towards 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.
Broad Value Outlook
In aggregate, DSW Inc. 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 DSW a solid choice for value investors.
What About the Stock Overall?
Though DSW Inc. 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 ‘D’. As a result, Sanderson Farms has 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 mixed at best. The current quarter has seen three estimates go higher in the past sixty days compared to three lower, while the full year estimate has seen five going higher, compared to two moving in the opposite direction.
This has had a modest impact on the consensus estimate as the current quarter estimate witnessed no changes over the past two months, whereas the full year estimate has edged up by roughly 2.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
DSW Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its solid Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 17% out of more than 250 industries).
In fact, over the past two years, the Zacks Retail Apparel/Shoes industry has clearly underperformed the broader market, as you can see below:
.jpg)
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Can DSW Inc. Be a Solid 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 DSW 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, DSW Inc. has a trailing twelve months PE ratio of 14.85, 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 19.92. If we focus on the long-term PE trend, DSW Inc’s current PE is below its mid point level over the past five years. Moreover, the current level is below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Retail– Apparel/Shoes industry’s trailing twelve months PE ratio, which stands at 14.92. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
However, we should also point out that DSW Inc. has a forward PE ratio (price relative to this year’s earnings) of 14.38, which is roughly in line with the current level. Hence the forward earnings estimates are already incorporated in the company’s current share price.
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, DSW Inc. has a P/S ratio of about 0.63. This is much lower than the S&P 500 average, which comes in at 2.98 right now. However, as we can see in the chart below, this is somewhat around the lows for this stock in particular over the past few years.
If anything, DSW Inc. is towards 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.
Broad Value Outlook
In aggregate, DSW Inc. 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 DSW a solid choice for value investors.
What About the Stock Overall?
Though DSW Inc. 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 ‘D’. As a result, Sanderson Farms has 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 mixed at best. The current quarter has seen three estimates go higher in the past sixty days compared to three lower, while the full year estimate has seen five going higher, compared to two moving in the opposite direction.
This has had a modest impact on the consensus estimate as the current quarter estimate witnessed no changes over the past two months, whereas the full year estimate has edged up by roughly 2.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
DSW Inc. Price and Consensus
DSW Inc. Price and Consensus | DSW Inc. Quote
This somewhat favorable trend is why the stock has just a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
DSW Inc. is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its solid Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 17% out of more than 250 industries).
In fact, over the past two years, the Zacks Retail Apparel/Shoes industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>