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 Torchmark Corporation 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, Torchmark Corporation has a trailing twelve months PE ratio of 16.8, 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. If we focus on the stock’s long-term PE trend, the current level puts Torchmark Corporation’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
However, the stock’s PE also compares unfavorably with the Zacks classified Insurance – Life industry’s trailing twelve months PE ratio, which stands at 15.9.
We should also point out that Torchmark Corporation has a forward PE ratio (price relative to this year’s earnings) of 16.35, so it is fair to say that a slightly more value-oriented path may be ahead for Torchmark Corporation stock in the near term.
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, Torchmark Corporation has a P/S ratio of about 2.3. This is much lower than the S&P 500 average, which comes in at 3.2 right now.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Torchmark Corporation’s P/CF ratio of 9 is lower than the Zacks classified Insurance – Life industry average of 17.5, which indicates that the stock is undervalued in this respect too.
Broad Value Outlook
In aggregate, Torchmark Corporation 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 Torchmark Corporation a solid choice for value investors.
What About the Stock Overall?
Though Torchmark Corporation 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 ‘C’. This gives TMK a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have rising. The current quarter has seen three estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen three up and none down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.9% in the past two months, while the full year estimate has inched up by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend is why the stock has a Zacks Rank #2 (Buy).
Bottom Line
Torchmark Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, with a good industry rank (Top 14% compared to over 250 industries) and a Zacks Rank #2, it is hard to not get excited about this company overall. In fact, over the past year, the Zacks Insurance - Life industry has clearly outperformed the broader market, as you can see below:
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So, value investors might want to grab the stock as it appears to be a compelling pick.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>
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Should Value Investors Pick Torchmark Corporation (TMK)?
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 Torchmark Corporation 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, Torchmark Corporation has a trailing twelve months PE ratio of 16.8, 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. If we focus on the stock’s long-term PE trend, the current level puts Torchmark Corporation’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
However, the stock’s PE also compares unfavorably with the Zacks classified Insurance – Life industry’s trailing twelve months PE ratio, which stands at 15.9.
We should also point out that Torchmark Corporation has a forward PE ratio (price relative to this year’s earnings) of 16.35, so it is fair to say that a slightly more value-oriented path may be ahead for Torchmark Corporation stock in the near term.
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, Torchmark Corporation has a P/S ratio of about 2.3. This is much lower than the S&P 500 average, which comes in at 3.2 right now.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Torchmark Corporation’s P/CF ratio of 9 is lower than the Zacks classified Insurance – Life industry average of 17.5, which indicates that the stock is undervalued in this respect too.
Broad Value Outlook
In aggregate, Torchmark Corporation 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 Torchmark Corporation a solid choice for value investors.
What About the Stock Overall?
Though Torchmark Corporation 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 ‘C’. This gives TMK a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have rising. The current quarter has seen three estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen three up and none down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.9% in the past two months, while the full year estimate has inched up by 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Torchmark Corporation Price and Consensus
Torchmark Corporation Price and Consensus | Torchmark Corporation Quote
This positive trend is why the stock has a Zacks Rank #2 (Buy).
Bottom Line
Torchmark Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, with a good industry rank (Top 14% compared to over 250 industries) and a Zacks Rank #2, it is hard to not get excited about this company overall. In fact, over the past year, the Zacks Insurance - Life industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to grab the stock as it appears to be a compelling pick.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>