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 WisdomTree Investments, Inc. WETF 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:
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, WisdomTree Investments has a trailing twelve months PE ratio of 14.83, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.81. If we focus on the long-term PE trend, WisdomTree Investments’ current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
However, the stock’s PE also compares unfavorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 13.09. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
We should also point out that WisdomTree Investments has a forward PE ratio (price relative to this year’s earnings) of just 17.95, so it is fair to say that a slightly more value-oriented path may be ahead for WisdomTree Investments’ stock in the near term too.
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, WisdomTree Investments has a P/S ratio of about 2.04. This is relatively lower than the S&P 500 average, which comes in at 3.47 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.
If anything, WETF 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, WisdomTree Investments currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes WisdomTree Investments a solid choice for value investors.
For example, the PEG ratio for WisdomTree Investments is just 0.74, a level that is slightly lower than the industry average of 1.53. 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 7.72, which is noticeably better than the industry average of 8.29. Clearly, WETF is a solid choice on the value front from multiple angles.
What about the Stock Overall?
Though WisdomTree Investments 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 A. This gives WETF 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 year has seen six upward revisions in the past sixty days compared to no downward revision, while the fiscal year 2021 estimate has seen five upward revisions compared to no downward revision in the same time period.
The current year consensus estimate has surged 23.5% in the past two months, whereas the fiscal year 2021 estimates soared 26.3% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
WisdomTree Investments, Inc. Price and Consensus
WisdomTree Investments, Inc. price-consensus-chart | WisdomTree Investments, Inc. Quote
Owing to the positive estimate trend, the stock has a Zacks Rank #2 (Buy), which is why we are expecting an outperformance from the company in the near-term.
WisdomTree Investments is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 37%) and a solid Zacks Rank instills investor confidence.
So, value investors might want to delve deeper in this stock as it appears to be a compelling pick.
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