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 Anthem 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, Anthem has a trailing twelve months PE ratio of 15.12, 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 compares in at about 20.28. If we focus on the stock’s long-term PE trend, the current level puts Anthem’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Computer & Technology sector’s trailing twelve months PE ratio, which stands at 21.25. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Anthem has a forward PE ratio (price relative to this year’s earnings) of just 14.44, so it is fair to say that a slightly more value-oriented path may be ahead for Anthem 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, Anthem has a P/S ratio of about 0.58. This is far lower than the S&P 500 average, which comes in at 3.08 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, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Anthem 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 Anthem a solid choice for value investors.
What About the Stock Overall?
Though Anthem 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 ‘C’ and a Momentum score of ‘A’. This gives ANTM 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 enough encouraging. The current quarter has seen two estimates going higher in the past sixty days compared to no lower. This has had a significant impact on the current quarter consensus estimate that has risen by 3.6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Anthem, Inc. Price and Consensus
Even Anthem has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Anthem is 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 13% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
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.
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Should Investors Consider Anthem (ANTM) a Value Stock?
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 Anthem 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, Anthem has a trailing twelve months PE ratio of 15.12, 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 compares in at about 20.28. If we focus on the stock’s long-term PE trend, the current level puts Anthem’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Computer & Technology sector’s trailing twelve months PE ratio, which stands at 21.25. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Anthem has a forward PE ratio (price relative to this year’s earnings) of just 14.44, so it is fair to say that a slightly more value-oriented path may be ahead for Anthem 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, Anthem has a P/S ratio of about 0.58. This is far lower than the S&P 500 average, which comes in at 3.08 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, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Anthem 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 Anthem a solid choice for value investors.
What About the Stock Overall?
Though Anthem 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 ‘C’ and a Momentum score of ‘A’. This gives ANTM 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 enough encouraging. The current quarter has seen two estimates going higher in the past sixty days compared to no lower. This has had a significant impact on the current quarter consensus estimate that has risen by 3.6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Anthem, Inc. Price and Consensus
Anthem, Inc. Price and Consensus | Anthem, Inc. Quote
Even Anthem has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Anthem is 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 13% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
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.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>