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Here's Why You Should Add Owens Corning (OC) Right Away

Owens Corning Inc OC is a world leader in building materials systems and composite solutions. This Zacks Rank #1 (Strong Buy) company has solid prospects and should make a valuable addition to your portfolio. Let us delve deeper into the other factors which make this Fortune 500 company a lucrative pick.

Stock Price Movement

Shares of Owens Corning have returned over 29.6% so far this year, comparing favorably with the Building Products - Miscellaneous industry’s gain of 6.3%. That said, we noticed that the company has outperformed the industry in each of 4-week, 12-week and 52-week time frames, giving the stock a Momentum Score of ‘A’.

Earnings Growth

Owens Corning makes a great pick in terms of growth investment. Arguably, nothing is more important than earnings growth as surging profit levels are often an indication of solid prospects.

Owens Corning has a historical EPS growth rate (average trailing 12-month EPS growth rate over the last 3-5 years of actual earnings) of 14.2%, higher than the industry average of 11.6%. The company’s current year EPS growth is projected at 10.6%, while the Zacks categorized Building Products - Miscellaneous industry’s average calls for EPS growth of 9.9%.

Valuation Looks Rational

Owens Corning has a Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this perspective.

The company currently has a trailing 12-months Price-to-Earnings (P/E) ratio of 16.92, while the S&P 500 average stands at 20.18. Moreover, its forward P/E ratio (price compared to this year’s earnings) is lower at 16.68. This indicates that a slightly more value-oriented path may be ahead for Owens Corning.

Looking at the company’s sales, the company currently trades at a Price-to-sales (P/S) ratio of 1.28, significantly lower than the S&P 500 average of 3.13. Some prefer this metric over other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account and thus can give a more accurate picture of the financial health of a business. Owens Corning has a P/CF of 10.90, lower than the Building Products - Miscellaneous industry’s average of 12.33.

All these ratios show that the company is undervalued in comparison to its peers and thus it a good time to place a bet on the stock.

Earnings History and Future Estimates

Owens Corning has remarkably beaten earnings estimates in all of the trailing four quarters, recording an average beat of 29.81%.

The company’s earnings estimates have been trending upward lately. The current quarter has seen two estimates go higher in the past 30 days compared to none lower, while the full-year estimate has seen two upward revisions and no downward revision.

As a result, the current quarter consensus estimate has increased 2% in the past month, while the full-year estimate has inched 1% higher. 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 indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

Owens Corning is expected to perform well in the quarters ahead, given its strong fundamentals. Moreover, the company’s VGM Score of 'A' coupled with a Zacks Rank #1 makes for a solid investment choice.

Other Stocks to Consider

Other top-ranked stocks in the industry include NCI Building Systems, Inc. NCS, Masco Corporation MAS and Patrick Industries, Inc. PATK.

NCI Building sports a Zacks Rank #1 and is likely to witness a 42.9% rise in earnings in fiscal 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masco, a Zacks Rank #2 (Buy) stock, is expected to exhibit 29.6% growth in 2017 earnings.

Patrick, a Zacks Rank #2 stock, is likely to witness 15.8% growth in 2017 earnings.

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NCI Building Systems, Inc. (NCS): Free Stock Analysis Report
 
Masco Corporation (MAS): Free Stock Analysis Report
 
Owens Corning Inc (OC): Free Stock Analysis Report
 
Patrick Industries, Inc. (PATK): Free Stock Analysis Report
 
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