Yahoo Finance Should Value Investors Pick Green Brick (GRBK) Stock Now?
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 Green Brick Partners, Inc. GRBK 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, Green Brick has a trailing twelve months PE ratio of 9, 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 25.1. If we focus on the long-term PE trend, Green Brick’s current PE level puts it marginally below its midpoint over the past five years.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 16.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Green Brick has a forward PE ratio (price relative to this year’s earnings) of just 7.2, so it is fair to say that a slightly more value-oriented path may be ahead for Green Brick Partners 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.
Image Source: Zacks Investment Research
Right now, Green Brick has a P/S ratio of about 1.1. This is lower than the industry’s average of 2.3. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
If anything, GRBK is above the median of the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Green Brick 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 Green Brick Partners a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 10.9, which is somewhat better than the industry average of 12.59). Clearly, GRBK is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Green Brick 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 GRBK a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending higher. The current quarter and the full year estimate have seen one upward revision each in the past sixty days period.
As a result, the consensus estimate for the current quarter and the full year has risen by 3% and 5.7%, respectively, in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Green Brick Partners, Inc. Price and Consensus
Green Brick Partners, Inc. price-consensus-chart | Green Brick Partners, Inc. Quote
This favorable trend is why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
Green Brick is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its Zacks Rank also indicates robust growth potential in the near future. Also, the company’s prospects seem encouraging due to favorable broader factors, as it has a strong industry rank (top 20%). In fact, over the past year, the industry has clearly outperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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