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
Hudbay Minerals Inc.
HBM
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, Hudbay Minerals has a trailing twelve months PE ratio of 18.38, 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 19.36. If we focus on the long-term PE trend, Hudbay Minerals’ current PE level puts it above its midpoint over the past five years.
Image Source: Zacks Investment Research
The stock’s PE compares slightly unfavorably with the industry’s trailing twelve months PE ratio, which stands at 18.10. This indicates that the stock is relatively overvalued right now, compared to its peers.
Image Source: Zacks Investment Research
Nevertheless, we should point out that Hudbay Minerals has a forward PE ratio (price relative to this year’s earnings) of just 8.92, so it is fair to say that a slightly more value-oriented path may be ahead for Hudbay Minerals stock in the near term.
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, Hudbay Minerals has a P/S ratio of about 1.00. This is lower than the S&P 500 average, which comes in at 4.11 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, HBM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Hudbay Minerals currently has a Zacks Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Hudbay Minerals a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Hudbay Minerals is 0.33, a level that is lower than the industry average of 1.81. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.97, which is better than the industry average of 6.56. Clearly, HBM is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Hudbay Minerals 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 A and a Momentum score of F. This gives HBM 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 quarter has seen five estimates go higher in the past sixty days compared to six lower, while the full year estimate has seen three upward and eight downward revisions in the same time period.
As a result, the current quarter consensus estimate has fallen by 5.6% in the past two months, while the full year estimate has declined 14.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
HudBay Minerals Inc Price and Consensus
HudBay Minerals Inc price-consensus-chart
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HudBay Minerals Inc Quote
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
Hudbay Minerals is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 41% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past two years, the industry has outperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. 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.
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