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National CineMedia: Is NCMI a Good 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 National CineMedia Inc. (NCMI - 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, National CineMedia has a trailing twelve months PE ratio of 17.03, 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 19.72. If we focus on the long-term PE trend, National CineMedia’s current PE level puts it way below its midpoint of 31.20 over the past five years. In fact, the current P/E marks the stock’s lowest in the said time frame, thus indicating immense scope for entry.
Further, the stock’s PE compares favorably with the Zacks Business Services sector’s trailing twelve months PE ratio, which stands at 23.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should point out that National CineMedia has a forward PE ratio (price relative to this year’s earnings) of just 20.64, so it is fair to expect an increase in the company’s share price in the near future.
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, National CineMedia has a P/S ratio of about 0.78. This is considerably lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, NCMI is at the lower end of its range in the time period from a P/S metric. This suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, National CineMedia 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 National CineMedia a solid choice for value investors.
What About the Stock Overall?
Though National CineMedia 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 B. This gives NCMI 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 slightly mixed. The current quarter has seen two estimates go higher in the past sixty days compared to no downward revisions, while the full year estimate has seen one upward and downward revision each, in the same time period.
This has had a somewhat negative impact on the consensus estimate though, as the full year consensus estimate has tumbled 10% in the past two months, while the current quarter estimate has remained unchanged. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Given these trends, the stock has just a Zacks Rank #3 (Hold), which indicates why we are looking for in-line performance from the company in the near term.
Bottom Line
National CineMedia is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. While the stock has a Zacks Rank #3, its solid Zacks Industry Rank (Top 28% out of 265 Zacks industries) indicates that the broader factors are favorable for the company.
So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Image: Bigstock
National CineMedia: Is NCMI a Good 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?
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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 National CineMedia Inc. (NCMI - 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, National CineMedia has a trailing twelve months PE ratio of 17.03, 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 19.72. If we focus on the long-term PE trend, National CineMedia’s current PE level puts it way below its midpoint of 31.20 over the past five years. In fact, the current P/E marks the stock’s lowest in the said time frame, thus indicating immense scope for entry.
Further, the stock’s PE compares favorably with the Zacks Business Services sector’s trailing twelve months PE ratio, which stands at 23.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should point out that National CineMedia has a forward PE ratio (price relative to this year’s earnings) of just 20.64, so it is fair to expect an increase in the company’s share price in the near future.
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, National CineMedia has a P/S ratio of about 0.78. This is considerably lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, NCMI is at the lower end of its range in the time period from a P/S metric. This suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, National CineMedia 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 National CineMedia a solid choice for value investors.
What About the Stock Overall?
Though National CineMedia 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 B. This gives NCMI 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 slightly mixed. The current quarter has seen two estimates go higher in the past sixty days compared to no downward revisions, while the full year estimate has seen one upward and downward revision each, in the same time period.
This has had a somewhat negative impact on the consensus estimate though, as the full year consensus estimate has tumbled 10% in the past two months, while the current quarter estimate has remained unchanged. You can see the consensus estimate trend and recent price action for the stock in the chart below:
National CineMedia, Inc. Price and Consensus
National CineMedia, Inc. Price and Consensus | National CineMedia, Inc. Quote
Given these trends, the stock has just a Zacks Rank #3 (Hold), which indicates why we are looking for in-line performance from the company in the near term.
Bottom Line
National CineMedia is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. While the stock has a Zacks Rank #3, its solid Zacks Industry Rank (Top 28% out of 265 Zacks industries) indicates that the broader factors are favorable for the company.
So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>