Is PolyOne Corporation (POL) 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 PolyOne Corporation POL 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, PolyOne Corporation has a trailing twelve months PE ratio of 15.85, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.17. If we focus on the stock’s long-term PE trend, the current level puts PolyOne Corporation’s current PE ratio below its midpoint over the past five years, with the number having remained relatively stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Basic Materials sector’s trailing twelve months PE ratio, which stands at 21.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that PolyOne Corporation has a forward PE ratio (price relative to this year’s earnings) of just 14.55, so it is fair to say that a slightly more value-oriented path may be ahead for PolyOne Corporation stock in the near term too.
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, PolyOne Corporation has a P/S ratio of just 0.85. This is significantly lower than the S&P 500 average, which comes in at 3.06 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, PolyOne Corporation 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 PolyOne Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for PolyOne Corporation is just 1.45, a level that is lower than the industry average of 1.68. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, POL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though PolyOne Corporation 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 ‘B’ and a Momentum score of ‘F’. This gives POL a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been declining. The current quarter has seen no estimates go higher in the past sixty days compared to four lower, while the full year estimate has seen one up and four down in the same time period.
This has led to the current quarter consensus estimate decline by 10.2% in the past two months, while the full year estimate has inched lower by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
PolyOne Corporation Price and Consensus
PolyOne Corporation Price and Consensus | PolyOne Corporation Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold).
Bottom Line
PolyOne Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 22% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past year, the Zacks Chemicals - Plastics industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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