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 Avis Budget Group, Inc. CAR 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: 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, Avis Budget has a trailing twelve months PE ratio of 16.10, as you can see in the chart below: Zacks Investment Research 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 24.71. If we focus on the long-term PE trend, Avis Budget’s current PE level puts it above its midpoint over the past five years. Zacks Investment Research 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 32.05. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. Zacks Investment Research Image Source: Zacks Investment Research We should also point out that Avis Budget has a forward PE ratio (price relative to this year’s earnings) of just 6.98, so it is fair to say that a slightly more value-oriented path may be ahead for Avis Budget stock in the near term too.

source finance.yahoo.com

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