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 Interface, Inc. TILE 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, Interface has a trailing twelve months PE ratio of 14.85, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 23.96. If we focus on the long-term PE trend, Interface’s current PE level puts it above its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 69.18. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Interface has a forward PE ratio (price relative to this year’s earnings) of just 14.22, so it is fair to say that a slightly more value-oriented path may be ahead for Interface stock in the near term too.
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, Interface has a P/S ratio of about 0.79. This is significantly lower than the S&P 500 average, which comes in at 4.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, TILE 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, Interface 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 Interface 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 3.75, which is far better than the industry average of 9.47. Clearly, TILE is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Interface 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 B and a Momentum score of C. This gives TILE 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 encouraging. The current quarter as well as the full year has seen two estimates go higher in the past sixty days compared to none lower.
As a result, the current quarter consensus estimate has risen by 10.3% in the past two months, while the full year estimate has increased 4.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Interface, Inc. Price and Consensus
Interface, Inc. price-consensus-chart | Interface, Inc. Quote
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
Interface is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 27%) and strong Zacks Rank, Interface looks like a strong value contender. In fact, over the past one year, the industry has outperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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November 29, 2021 at 09:30PM
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Is Interface (TILE) Stock a Suitable Pick for Value Investors? - Yahoo Finance
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