Is Banco Macro a Suitable Stock for Value Investors?

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 Banco Macro S.A. BMA 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, Banco Macro has a trailing twelve months PE ratio of 11.2, 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 20.1. If we focus on the long-term PE trend, Banco Macro’s current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.

Further, the stock’s PE also compares favorably with the Zacks classified Banks - Foreign industry’s trailing twelve months PE ratio, which stands at 13.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Banco Macro has a forward PE ratio (price relative to this year’s earnings) of just 10.5, so it is fair to say that a slightly more value-oriented path may be ahead for Banco Macro 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, Banco Macro has a P/S ratio of about 2.1. This is fairly lower than the S&P 500 average, which comes in at 3.0 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, BMA 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, Banco Macro 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 Banco Macro a solid choice for value investors, and some of its other key metrics make this pretty clear too.

What About the Stock Overall?

Though Banco Macro 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 ‘F’ and a Momentum score of ‘A’. This gives BMA 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 earnings estimates have seen no revisions both for the current quarter and current year.

On the contrary, the magnitude of current quarter consensus estimate has risen by 2.8% in the past two months while the full year estimate has also increased by 4.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Macro Bank Inc. Price and Consensus

Macro Bank Inc. Price and Consensus | Macro Bank Inc. Quote

This somewhat mixed 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

Banco Macro is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Even, with a top industry rank (top 18% 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 Zacks Banks - Foreign industry has clearly underperformed 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.

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