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 Weight Watchers International, Inc. (WTW Quick QuoteWTW - 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, Weight Watchers has a trailing twelve months PE ratio of 17.44, as you can see in the chart below:

This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 20.37. If we focus on the PE trend, Weight Watchers’ current PE level is considerably lower than its highs over the last one year (which stands at 25.80). This suggests that the stock is undervalued compared to its historical levels.

Further, the stock’s PE also compares favorably with the Zacks classified Consumer Services – Miscellaneous industry’s trailing twelve months PE ratio, which stands at 20.13. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.


We should also point out that Weight Watchers has a forward PE ratio (price relative to this year’s earnings) of just 14.03, so it is fair to say that a slightly more value-oriented path may be ahead for Weight Watchers 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, Weight Watchers has a P/S ratio of about 1.00. This is way lower than the S&P 500 average, which comes in at 3.09 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, WTW is hovering around its mid point 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, Weight Watchers currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all the stocks we cover from this look. This makes Weight Watchers a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Weight Watchers is just 0.94, a level that is far 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, WTW is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Weight Watchers 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 ‘A’. This gives WTW 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 decidedly bullish. Notably, the current quarter has seen one estimate go higher and one estimate go lower and in the last sixty days, while the current year estimate has seen two upward revisions and no downward revisions over the same time frame.

This has had a positive impact on the consensus estimate as the current quarter consensus estimate loss has narrowed down by an impressive28.6% in the last sixty days, while the current year consensus estimate has improved by 12.6% over the same time frame. 

You can see the consensus estimate trend and recent price action for the stock in the chart below:

Weight Watchers International Inc Price and Consensus

Weight Watchers International Inc Price and Consensus | Weight Watchers International Inc Quote

This bullish trend might be why the stock has a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line      

Weight Watchers is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (Top 31% out of more than 250 industries) and a top Zacks Rank, the company deserves attention right now.

So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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