Should Value Investors Pick Sutherland Asset Management?

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 Sutherland Asset Management Corporation SLD 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, Sutherland Asset Management has a trailing twelve months PE ratio of 10.86, 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 21.72. If we focus on the long-term PE trend, Sutherland Asset Management’s current PE level puts it below its midpoint of 12.36 over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it could be a great entry point.

Further, the stock’s PE compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 17.00. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Sutherland Asset Management has a forward PE ratio (price relative to this year’s earnings) of 9.77, so it is fair to say that a slightly more value-oriented path may be ahead for Sutherland Asset Management 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, Sutherland Asset Management has a P/S ratio of about 3.58. This is a bit higher than the S&P 500 average, which comes in at 3.45 right now. This makes the stock look slightly overvalued from the P/S aspect, when compared with the market at large.

Broad Value Outlook

In aggregate, Sutherland Asset Management currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Sutherland Asset Management a solid choice for value investors.

What About the Stock Overall?

Though Sutherland Asset Management 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 and Momentum Score of D, each. This gives SLD a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter and full year estimates have seen one upward revision each, compared to no downward revisions in the past 60 days.

This has had a positive impact on the consensus estimate, as the current quarter consensus estimate has risen by 11.8% in the past two months, while the full year estimate has increased 5.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Courtesy of this bullish trend, the stock sports a Zacks Rank #2 (Buy), which is why we are looking for outperformance from the company in the near term.

Bottom Line

Sutherland Asset Management is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, this Zacks Rank #2 company has a sluggish Zacks Industry Rank (among Bottom 34% of more than 250 industries). 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 the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.

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