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Is Everest Re Group, Ltd. (RE) a Suitable Value 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 Everest Re Group, Ltd. RE 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:

P/E 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, Everest has a trailing twelve months PE ratio of 10.77, as you can see in the chart below:

Again, this level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.50. If we focus on the long-term PE trend, Everest’s current PE level puts it on par with its high value over the past five years.

Further, the stock’s PE compares favorably with the Zacks categorized Insurance - Property And Casualty industry’s trailing twelve months PE ratio, which stands at 21.35. This indicates that the stock is undervalued right now, compared to its peers.

However, we should also point out that Everest has a forward PE ratio (price relative to this year’s earnings) of 12.69, so it is fair to expect an increase in the company’s share price in the near future.

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, Everest has a P/S ratio of about 1.81. This is lower than the industry average, which comes in at 3.18 right now.

Everest 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, Everest currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This is because some of its other key metrics are favorable.

For example, the PEG ratio for Everest is just 1.27, a level that is lower than the industry average of 1.78. 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 7.51, which is better than the industry average of 9.79. Clearly, RE is a solid choice on the value front from multiple angles.

What About the Stock Overall?

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 RE 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 encouraging as the current year has seen four upward estimate revision in the past 60 days compared to none downward while the next year have seen one upward and one downward in the same time frame.

As a result, the current year consensus estimate has moved north by about 2% in the past two months, while the next year estimate has inched higher by 0.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Everest Re Group, Ltd. Price and Consensus

This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

Everest is an inspired choice for value investors, as it is hard to beat its good lineup of statistics on this front. However, with a sluggish industry rank (bottom 10% out of 265 industries), it is hard to get too excited about this company overall. In fact, over the past six months, the Zacks Insurance - Property And Casualty industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for broader factors to turn favorable in this name first, but once that happen, this stock could be a compelling pick.

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