Should Value Investors Buy Methanex (MEOH) Stock?

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This story originally appeared on Zacks

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the “Value” category. When paired with a high Zacks Rank, “A” grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Methanex (MEOH). MEOH is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 9.77, which compares to its industry’s average of 12.76. Over the last 12 months, MEOH’s Forward P/E has been as high as 78,954.13 and as low as -7,459.79, with a median of 13.96.

Another valuation metric that we should highlight is MEOH’s P/B ratio of 1.90. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. MEOH’s current P/B looks attractive when compared to its industry’s average P/B of 2.70. Within the past 52 weeks, MEOH’s P/B has been as high as 2.54 and as low as 1.34, with a median of 1.86.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. MEOH has a P/S ratio of 0.9. This compares to its industry’s average P/S of 0.98.

Finally, we should also recognize that MEOH has a P/CF ratio of 5.75. This data point considers a firm’s operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. MEOH’s current P/CF looks attractive when compared to its industry’s average P/CF of 11.66. Over the past 52 weeks, MEOH’s P/CF has been as high as 18.24 and as low as 5.02, with a median of 9.99.

These are only a few of the key metrics included in Methanex’s strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MEOH looks like an impressive value stock at the moment.

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