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Is Regal Beloit (RBC) a Profitable Pick 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 Regal Beloit Corporation (RBC - 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, Regal Beloit has a trailing twelve months PE ratio of 15.65, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.77. Also, if we focus on the long-term PE trend, Regal Beloit’s current PE level puts it above its midpoint of 14.48 over the past five years.
The stock’s PE also compares favorably with the Industrial Products sector’s trailing twelve months PE ratio, which stands at 18.36. This indicates that the stock is undervalued right now, compared to its peers.
We should also point out Regal Beloit has a forward PE ratio (price relative to this year’s earnings) of 15.48, so it is fair to say that a more value-oriented path is ahead for Regal Beloit’s 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, Regal Beloit has a P/S ratio of just 1.10. This is noticeably lower than the S&P 500 average, which comes in at 3.71 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.
Broad Value Outlook
In aggregate, Regal Beloit currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Regal Beloit a solid choice for value investors and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Regal Beloit is just 1.55, a level that is slightly lower than the industry average of 2.08. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, RBC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Regal Beloit 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 as well as a Momentum Score of B. This gives RBC 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 upbeat. While the current year estimate has seen three upward and no downward movements, the full-year 2021 estimate has seen one upward and no downward movement over the past two months.
This has had a positive effect on the consensus estimate. While the current year consensus has climbed 1.22% over the past two months, the full-year 2021 estimate has increased 2.19%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
Regal Beloit is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite a sluggish industry rank (among bottom 40% of more than 250 industries), a Zacks Rank #2 instils investors’ optimism in the stock.
However, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
We believe, despite an unfavorable past industry performance and rank, positive analyst sentiments and favorable industry factors make this value stock a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Is Regal Beloit (RBC) a Profitable Pick 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 Regal Beloit Corporation (RBC - 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, Regal Beloit has a trailing twelve months PE ratio of 15.65, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.77. Also, if we focus on the long-term PE trend, Regal Beloit’s current PE level puts it above its midpoint of 14.48 over the past five years.
The stock’s PE also compares favorably with the Industrial Products sector’s trailing twelve months PE ratio, which stands at 18.36. This indicates that the stock is undervalued right now, compared to its peers.
We should also point out Regal Beloit has a forward PE ratio (price relative to this year’s earnings) of 15.48, so it is fair to say that a more value-oriented path is ahead for Regal Beloit’s 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, Regal Beloit has a P/S ratio of just 1.10. This is noticeably lower than the S&P 500 average, which comes in at 3.71 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.
Broad Value Outlook
In aggregate, Regal Beloit currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Regal Beloit a solid choice for value investors and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Regal Beloit is just 1.55, a level that is slightly lower than the industry average of 2.08. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, RBC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Regal Beloit 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 as well as a Momentum Score of B. This gives RBC 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 upbeat. While the current year estimate has seen three upward and no downward movements, the full-year 2021 estimate has seen one upward and no downward movement over the past two months.
This has had a positive effect on the consensus estimate. While the current year consensus has climbed 1.22% over the past two months, the full-year 2021 estimate has increased 2.19%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Regal Beloit Corporation Price and Consensus
Regal Beloit Corporation price-consensus-chart | Regal Beloit Corporation Quote
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for better performance from the company in the near term.
Bottom Line
Regal Beloit is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite a sluggish industry rank (among bottom 40% of more than 250 industries), a Zacks Rank #2 instils investors’ optimism in the stock.
However, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
We believe, despite an unfavorable past industry performance and rank, positive analyst sentiments and favorable industry factors make this value stock a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>