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 The Children's Place, Inc. (PLCE Quick QuotePLCE - 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, Children's Place has a trailing twelve months PE ratio of 20.47, as you can see in the chart below:



This level stands slightly above the market at large, as the PE for the S&P 500 stands at about 20.27. While Children's Place’s current PE level puts it above its midpoint of 17.50 over the past five years, the current level stands below the highs for the stock, still leaving some room for entry.



Further, the stock’s PE also compares favorably with the Zacks classified Retail – Wholesale sector’s trailing twelve months PE ratio, which stands at 25.44. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
 


We should also point out that Children's Place has a forward PE ratio (price relative to this year’s earnings) of just 16.41, so it is fair to say that a slightly more value-oriented path may be ahead for Children's Place 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, Children's Place has a P/S ratio of about 1.16. This is significantly lower than the S&P 500 average, which comes in at 3.07 right now. This makes the stock undervalued from the P/S aspect.



Broad Value Outlook

In aggregate, Children's Place 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 Children's Place a solid choice for value investors.

What About the Stock Overall?

Though Children's Place 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 ‘C’. This gives PLCE a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Notably, the company’s recent earnings estimates have been very encouraging, as the current quarter and full year have seen three and four estimates go higher in the past sixty days, respectively. Further, both the current quarter and full year estimates didn’t witness any downward revisions in the same time period.

This has had a significant impact on the consensus estimate, as the current quarter consensus estimate has risen by 7.2% in the past two months, while the full year estimate has increased about 11.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are looking for outperformance from the company in the near term.

Bottom Line

Children's Place is a good choice for value investors, given its decent lineup of statistics on this front. Though the company flaunts a solid Zacks Rank, its has a sluggish industry rank (Bottom 8% out of over 250 industries) owing to macroeconomic challenges looming over the retail space. In fact, the Zacks categorized Retail – Apparel/Shoes industry has clearly underperformed the broader market over the past two years, as you can see below:



Nonetheless, Children's Place’s solid fundamentals and inherent strength make it a sound bet. So, value investors might want to wait for the broader industry factors to turn around in this name first, but once that happens, this stock could be a compelling pick.

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