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 ICF International, Inc. ICFI 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, ICF International has a trailing twelve months PE ratio of 14.83. This level compares considerably favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 19.72.
If we focus on the long-term trend of the stock the current level puts ICF International’s current PE near its lows. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE also compares favorably with the Business Services sector’s trailing twelve months PE ratio, which stands at 23.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS 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, ICF International has a P/S ratio of about 0.71. This is much lower than the Business Services sector average, which comes in at 4.06x right now.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, ICF International currently has a Value Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes ICF International a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for ICF International is just 1.28, a level that is lower than the sector average of 1.79. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, ICFI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though ICF International 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 ‘C’ and a Momentum score of ‘B’. This gives ICFI a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, ICF International seems to have pretty striking prospects.
Meanwhile, the company’s earnings estimates have been trending downward lately. The current quarter has seen one estimate go higher in the past thirty days compared to four lower, while the full year estimate has seen two upward revisions and one downward revision in the same time period.
This has had meaningful impact on the consensus estimate as the current quarter consensus estimate has declined 3.6% over the past month, while the full year estimate has moved lower by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
ICF International, Inc. Price and Consensus
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
ICF International is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. It forms a part of the government services industry, which ranks among the Top 45% out of more than 250 industries.
In fact, over the past three years, the government services industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment