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 Gol Linhas Aereas Inteligentes S.A. GOL 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, Gol Linhas has a trailing twelve months PE ratio of 19.00, as you can see in the chart below:
This level actually compares slightly favorably with the market at large, as the PE for the S&P 500 stands at about 19.61. If we focus on the long-term PE trend, Gol Linhas’ current PE level puts it above its midpoint over the past five years.
However, the stock’s PE compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 10.44. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Gol Linhas has a forward PE ratio (price relative to this year’s earnings) of 22.97, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.
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, Gol Linhas has a P/S ratio of about 1.00. This is lower than the S&P 500 average, which comes in at 3.39 right now. 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.
GOL is actually in the higher zone of its trading range in the time period per the 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, Gol Linhas 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 Gol Linhas a solid choice for value investors.
What About the Stock Overall?
Though Gol Linhas 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 D. This gives GOL 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 trending lower. The current quarter has seen no estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen zero upward and four downward revisions in the same time period.
As a result, the current quarter consensus estimate has fallen by 25% in the past two months, while the full year estimate has decreased 50.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Gol Linhas Aereas Inteligentes S.A. Price and Consensus
Gol Linhas Aereas Inteligentes S.A. price-consensus-chart | Gol Linhas Aereas Inteligentes S.A. Quote
This negative 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.
Gol Linhas 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 24% out of more than 250 industries) further supports the growth potential of the stock.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has 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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