Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Should Value Investors Opt for Siemens (SIEGY) Stock?

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 Siemens AG SIEGY 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, Siemens has a trailing twelve months PE ratio of 18.28. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.56.



If we focus on the long-term PE trend, Siemens’ current PE level puts it above its midpoint over the past five years, with the number having been on a general uptrend since the beginning of 2016.

Further, the stock’s PE compares favorably with the Zacks classified Electronics - Miscellaneous Products industry’s trailing twelve months PE ratio, which stands at 23.67. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that Siemens has a forward PE ratio (price relative to this year’s earnings) of 15.22 – much lower than the current figure. So it is fair to say that a slightly more value-oriented path may be ahead for Siemens stock in the near term too.

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, Siemens has a P/S ratio of about 1.28. This is slightly higher than the Zacks categorized Electronics - Miscellaneous Products industry average, which comes in at 1.20 right now.



SIEGY 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.

PEG Ratio

While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.

Siemens’ PEG ratio stands at just 1.68, compared with the Zacks Electronics - Miscellaneous Products industry average of 1.90. This suggests a decent undervalued trading relative to its earnings growth potential right now.



Broad Value Outlook

In aggregate, Siemens 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 Siemens an apt choice for value investors, and all of the listed metrics make it pretty clear too.

What About the Stock Overall?

Though Siemens 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 ‘D’ and a Momentum score of ‘A’. This gives SIEGY a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate revisions in the past sixty days, while the full year estimate has seen two upward revisions versus none in the opposite direction, in the same time period.

This has had a small but meaningful impact on the consensus estimate though as the current quarter consensus estimate has remained constant in the past two months, while the full year estimate has increased 6.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Siemens AG Price and Consensus

This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

Siemens is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 20%) and strong Zacks Rank, Siemens looks like a strong value contender. In fact, over the past two years, the Zacks Electronics - Miscellaneous Products industry has clearly outperformed the broader market, as you can see below:



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.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Siemens AG (SIEGY): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research