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Is Owens Corning (OC) a Suitable Value Pick Right 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 Owens Corning OC 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, Owens Corning has a trailing twelve months PE ratio of 16.81. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.35.


 
If we focus on the long-term trend of the stock the current level puts the Owens Corning’s current PE among its lows. The current PE is well below its median for the term, which stands at 21.05. The present level seems to be an extremely suitable entry point for the stock in this respect.


 
Further, the stock’s PE also compares favorably with the Zacks classified Building & Construction Products – Miscellaneous industry’s trailing twelve months PE ratio, which stands at 17.63. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.


 
We should also point out that Owens Corning has a forward PE ratio (price relative to this year’s earnings) of 16.79 – slightly lower than the current level. Thus, it is fair to say that a slightly more value-oriented path may be ahead for Owens Corning stock in the near term.

PS 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, Owens Corning has a P/S ratio of about 1.27. This is a somewhat lower than the industry average, which comes in at 1.29 right now. However, as we can see in the chart below, this is well among highs for this stock in particular over the past few years.



As OC is actually in the higher zone of its trading range in the time period per the P/S metric, this suggests that the company’s stock price has already appreciated to some degree, relative to its sales.

Broad Value Outlook

In aggregate, Owens Corning currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Owens Corning a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, its P/B ratio (used to compare a stock's market value to its book value) stands at 1.87, lower than the industry average of 2.14. Additionally, its P/CF ratio (another great indicator of value) comes in at 10.98, while the industry’s average stands at 12.06. Clearly, OC is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Owens Corning 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 OC a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Owens Corning seems to have pretty striking prospects.

Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen two estimates go higher in the past thirty days compared to none lower, while the full year estimate has seen two upward revisions and no downward revision in the same time period.

This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has increased 2% in the past month, while the full year estimate has inched higher by 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Owens Corning Inc Price and Consensus

This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

Owens Corning is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a sluggish industry rank (Bottom 40% out of more than 250 industries) somewhat dims the sparkle over this company. Nevertheless, 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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