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 Hanesbrands Inc. HBI 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, Hanesbrands has a trailing twelve months PE ratio of 10.2, 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 25.8. If we focus on the long-term PE trend, Hanesbrands’ current PE level puts it marginally above its midpoint over the past five years. Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 96.1. 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 Hanesbrands has a forward PE ratio (price relative to this year’s earnings) of just 9.9, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate 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, Hanesbrands has a P/S ratio of about 0.8. This is a lower than the S&P 500 average, which comes in at 5.1 right now. However, we can see in the chart below, this is above the highs for this stock in particular over the past few years. Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms. Broad Value Outlook
In aggregate, Hanesbrands currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Hanesbrands 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, which is better than the industry average of 18.2. Clearly, HBI is a solid choice on the value front from multiple angles. What About the Stock Overall?
Though Hanesbrands 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 Score of B and a Momentum Score of B. This gives HBI 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 mixed at best. The current year consensus estimate has risen by 0.6% in the past two months, while the full-year 2022 estimate has remained unchanged in the same time period. You can see the consensus estimate trend and recent price action for the stock in the chart below: Hanesbrands Inc. Price and Consensus
Despite this mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of strong value metrics and this is why we are expecting above-average performance from the company in the near-term. Bottom Line
source Should Value Investors Pick Hanesbrands (HBI) Stock Now?