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 BT Group plc 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, BT Group has a trailing twelve months PE ratio of 9.64, as you can see in the chart below:
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(1).jpg)
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.12. Further, if we focus on the long-term PE trend, BT Group’s current PE level puts it below its midpoint of 11.63 over the past five years. Moreover, the current level stands close to the lows of 7.28, suggesting that it could be a solid entry point.
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(2).jpg)
Also, the stock’s PE also compares favorably with the Zacks classified Utilities sector’s trailing twelve months PE ratio, which stands at 15.54. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(3).jpg)
We should also point out that BT Group has a forward PE ratio (price relative to this year’s earnings) of 11.05, so it is fair to expect an 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, BT Group has a P/S ratio of just 1.23. This is much lower than the S&P 500 average, which comes in at 3.17 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.
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(4).jpg)
If anything, BT 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.
Broad Value Outlook
In aggregate, BT Group 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 BT Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for BT Group is 1.58, a level that is little lower than the industry average of 1.63. 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 4.78, which is better than the industry average of 6.15. Clearly, BT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though BT Group 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 ‘F’. This gives BT 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 one estimate go higher in the past sixty days compared to no downward revision, while the full year estimate has seen one upward and downward revision each, in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has risen by 4% in the past two months, while the full year estimate has inched lower by 4.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Further, owing to the adverse factors affecting the Zacks categorized Diversified Communications industry, the stock currently carries a Zacks Rank #5 (Strong Sell).
Bottom Line
BT Group is clearly 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 34% out of over 250 industries) and a dismal Zacks Rank #5, it is hard to get too excited about this company overall. In fact, over the past one year, the Zacks categorized Diversified Communications industry has clearly underperformed the broader market, as you can see below:
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(5).jpg)
So, value investors might want to wait for a better entry point on the stock, but once that happens, this stock could be a compelling pick.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
Image: Bigstock
Can BT Group be Good 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?
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(1).jpg)
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(2).jpg)
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(3).jpg)
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(4).jpg)
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 BT Group plc 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, BT Group has a trailing twelve months PE ratio of 9.64, 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 20.12. Further, if we focus on the long-term PE trend, BT Group’s current PE level puts it below its midpoint of 11.63 over the past five years. Moreover, the current level stands close to the lows of 7.28, suggesting that it could be a solid entry point.
Also, the stock’s PE also compares favorably with the Zacks classified Utilities sector’s trailing twelve months PE ratio, which stands at 15.54. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that BT Group has a forward PE ratio (price relative to this year’s earnings) of 11.05, so it is fair to expect an 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, BT Group has a P/S ratio of just 1.23. This is much lower than the S&P 500 average, which comes in at 3.17 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.
If anything, BT 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.
Broad Value Outlook
In aggregate, BT Group 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 BT Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for BT Group is 1.58, a level that is little lower than the industry average of 1.63. 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 4.78, which is better than the industry average of 6.15. Clearly, BT is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though BT Group 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 ‘F’. This gives BT 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 one estimate go higher in the past sixty days compared to no downward revision, while the full year estimate has seen one upward and downward revision each, in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has risen by 4% in the past two months, while the full year estimate has inched lower by 4.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
BT Group PLC Price and Consensus
BT Group PLC Price and Consensus | BT Group PLC Quote
Further, owing to the adverse factors affecting the Zacks categorized Diversified Communications industry, the stock currently carries a Zacks Rank #5 (Strong Sell).
![](https://staticx-tuner.zacks.com/images/zadmin_tuner_image/bt_20170222%20(5).jpg)
Bottom Line
BT Group is clearly 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 34% out of over 250 industries) and a dismal Zacks Rank #5, it is hard to get too excited about this company overall. In fact, over the past one year, the Zacks categorized Diversified Communications industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for a better entry point on the stock, but once that happens, this stock could be a compelling pick.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>