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 Newell Brands Inc. (NWL Quick QuoteNWL - 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, Newell has a trailing twelve months PE ratio of 17.88, as you can see in the chart below:



This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.49. If we focus on the long-term PE trend, Newell’s current PE level puts it slightly above its midpoint over the past five years.



Further, the stock’s PE also compares favorably with the Zacks classified Consumer Products - Miscellaneous Staples industry’s trailing twelve months PE ratio, which stands at 21.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.


 
We should also point out that Newell has a forward PE ratio (price relative to this year’s earnings) of just 16.23, so it is fair to say that a slightly more value-oriented path may be ahead for Newell 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, Newell has a P/S ratio of about 1.81. This is lower than the S&P 500 average, which comes in at 3.11 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.




Broad Value Outlook

In aggregate, Newell currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Newell a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Newell is just 1.40, a level that is lower than the industry average of 1.94. 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 10.01, which is far better than the industry average of 13.78. Clearly, NWL is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Newell 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 ‘A’ and a Momentum score of ‘B’. This gives TUP 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 four upward estimate revision in the past sixty days compared to three downward, while the full year estimate has seen eight upward and three downward revisions in the same time frame.

As a result, the current quarter consensus estimate has dropped by 3.3% in the past two months, while the full year estimate has inched higher by 0.7%.

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

Newell is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 40% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past one year, the Zacks Consumer Products - Miscellaneous Staples industry has underperformed the broader market, as you can see below:



Notably, the stock has a long term expected earnings growth of 11.64% and sports a Zacks Rank #3. These mixed expectations indicate that while the stock’s growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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