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 Bankinter, S.A. BKNIY 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, Bankinter has a trailing twelve months PE ratio of 17.5, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21. If we focus on the long-term PE trend, Bankinter’s current PE level puts it below its midpoint over the past five years.
However, the stock’s PE also compares unfavorably with the Zacks Banks – Foreign industry’s trailing twelve months PE ratio, which stands at 13.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Bankinter has a forward PE ratio (price relative to this year’s earnings) of just 14.5, so it is fair to say that a slightly more value-oriented path may be ahead for Bankinter 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, Bankinter has a P/S ratio of about 3.4. This is a bit higher than the S&P 500 average, which comes in at 3.3x right now, suggesting some level of overvalued trading.
Broad Value Outlook
In aggregate, Bankinter currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Bankinter 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 10.5, which is better than the industry average of 11.3. Clearly, BKNIY is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Bankinter 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 D and a Momentum Score of F. This gives BKNIY a Zacks VGM score — or its overarching fundamental grade — of C. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been discouraging. The current year has seen one estimate go higher in the past sixty days compared to one lower. This has had just a small impact on the consensus estimate though as the current year consensus estimate has fallen by 1.6% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Bankinter SA Price and Consensus
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Bankinter is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 29% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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