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Is Lear Corporation a Great Stock for Value Investors?
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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 Lear Corporation (LEA - 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, Lear Corporation has a trailing twelve months PE ratio of 9.2, 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 stands at about 20.3. If we focus on the long-term PE trend, Lear Corporation’s current PE level puts it below its midpoint over the past five years, with the number having fallen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Automotive - Original Equipment industry’s trailing twelve months PE ratio, which stands at 13.2. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that, Lear Corporation has a forward PE ratio (price relative to this year’s earnings) of just 8.6, so it is fair to say that a slightly more value-oriented path may be ahead for , Lear 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, Lear Corporation has a P/S ratio of about 0.5. This is significantly lower than the S&P 500 average, which comes in at 3.2 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
If anything, LEA is in the lower end of its range 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, Lear Corporation 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 Lear Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 6.9, which is far better than the industry average of 8.5. Clearly, LEA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lear 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 ‘A’ and a Momentum score of ‘A’. This gives LEA 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. The current quarter has seenno upward or downward revisions in the past 30 days, while the full year estimate has seen none up and one down in the same time period.
As a result the current quarter consensus estimate has remained static at $4.15 per share in the past one month, while the full year estimate has inched lower by 0.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
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
Lear Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a better industry rank (top 14% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Automotive - Original Equipment industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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Is Lear Corporation a Great Stock for Value Investors?
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 Lear Corporation (LEA - 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, Lear Corporation has a trailing twelve months PE ratio of 9.2, 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 stands at about 20.3. If we focus on the long-term PE trend, Lear Corporation’s current PE level puts it below its midpoint over the past five years, with the number having fallen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Automotive - Original Equipment industry’s trailing twelve months PE ratio, which stands at 13.2. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that, Lear Corporation has a forward PE ratio (price relative to this year’s earnings) of just 8.6, so it is fair to say that a slightly more value-oriented path may be ahead for , Lear 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, Lear Corporation has a P/S ratio of about 0.5. This is significantly lower than the S&P 500 average, which comes in at 3.2 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
If anything, LEA is in the lower end of its range 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, Lear Corporation 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 Lear Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 6.9, which is far better than the industry average of 8.5. Clearly, LEA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lear 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 ‘A’ and a Momentum score of ‘A’. This gives LEA 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. The current quarter has seenno upward or downward revisions in the past 30 days, while the full year estimate has seen none up and one down in the same time period.
As a result the current quarter consensus estimate has remained static at $4.15 per share in the past one month, while the full year estimate has inched lower by 0.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Lear Corporation Price and Consensus
Lear Corporation Price and Consensus | Lear Corporation Quote
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
Lear Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a better industry rank (top 14% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Automotive - Original Equipment industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>