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Should Value Investors Consider Loews Corporation (L) Stock?
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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 Loews Corporation (L - 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, Loews Corporation has a trailing twelve months PE ratio of 17.3, 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 21.5. If we focus on the stock’s long-term PE trend, the current level puts Loews Corporation’s current PE ratio slightly above its midpoint (which is 16.9) over the past five years.
However, the stock’s PE also compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 14.3. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Also, we should point out that Loews Corporation has a forward PE ratio (price relative to this year’s earnings) of 18.1, 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, Loews Corporation has a P/S ratio of about 1.3. This is substantially lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Loews Corporation currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes L a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 9.8, which is noticeably better than the industry average of 11.5. Clearly, L is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Loews 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 F and a Momentum score of D. This gives L a VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter consensus estimate has risen about 1.4% in the past two months, while the full year estimate has climbed 25%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Loews Corporation is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Loews Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a decent industry rank (top 38% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Should Value Investors Consider Loews Corporation (L) 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 Loews Corporation (L - 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, Loews Corporation has a trailing twelve months PE ratio of 17.3, 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 21.5. If we focus on the stock’s long-term PE trend, the current level puts Loews Corporation’s current PE ratio slightly above its midpoint (which is 16.9) over the past five years.
However, the stock’s PE also compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 14.3. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Also, we should point out that Loews Corporation has a forward PE ratio (price relative to this year’s earnings) of 18.1, 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, Loews Corporation has a P/S ratio of about 1.3. This is substantially lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Loews Corporation currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes L a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 9.8, which is noticeably better than the industry average of 11.5. Clearly, L is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Loews 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 F and a Momentum score of D. This gives L a VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter consensus estimate has risen about 1.4% in the past two months, while the full year estimate has climbed 25%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Loews Corporation Price and Consensus
Loews Corporation Price and Consensus | Loews Corporation Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Loews Corporation is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Loews Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a decent industry rank (top 38% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>