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Is MasTec (MTZ) a Great Stock for Value Investors?

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 MasTec, Inc. MTZ 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, MasTec has a trailing twelve months PE ratio of 22.49, as you can see in the chart below:



However, this level compares unfavorably with the market at large, as the PE for the S&P 500 stands at about 20.28. If we focus on the long-term PE trend, MasTec’s current PE level puts it above its midpoint over the past five years.



Further, the stock’s PE also compares unfavorably with the Zacks classified Construction: Building Products - Heavy Construction industry’s trailing twelve months PE ratio, which stands at 17.03. This indicates that the stock is relatively overvalued right now, compared to its peers.



Nevertheless, we should point out that MasTec has a forward PE ratio (price relative to this year’s earnings) of just 17.84, so it is fair to say that a slight value-oriented path may be ahead for MasTec stock in the near term.

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, MasTec has a P/S ratio of about 0.64. This is significantly lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.



If anything, MasTec is towards the higher end of its range in the time period from a 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, MasTec 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 MasTec a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for MasTec is 1.27, a level that is slightly lower than the industry average of 1.36. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.

What About the Stock Overall?

Though MasTec 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 ‘C’. This gives MTZ 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 quite encouraging. The current quarter has seen two estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen three upward and zero downward revisions in the same time period.

This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has increased by over 95% in the past two months, and the full year estimate has risen by 14.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
 

MasTec, Inc. Price and Consensus
 

MasTec, Inc. Price and Consensus | MasTec, Inc. Quote

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

MasTec is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, its strong Zacks Rank indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 38% out of more than 250 industries). In fact, over the past three years, the Zacks Building Products - Heavy Construction industry has clearly underperformed the broader market, as you can see below:



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

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