Should Value Investors Pick Burlington Stores (BURL) Stock Now?

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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 Burlington Stores, Inc. BURL 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, Burlington Stores has a trailing twelve months PE ratio of 27.65, as you can see in the chart below:

However, this level is somewhat unfavorable with the market at large, as the PE for the S&P 500 compares in at about 20.48. If we focus on the stock's long-term PE trend, the current level puts Burlington Stores' current PE ratio slightly below its midpoint (which is 28.16) over the past three years.

Further, the stock's PE also compares unfavorably with the Zacks classified Retail - Discount Stores industry's trailing twelve months PE ratio, which stands at 23.04. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.

Nonetheless, we should also point out that Burlington Stores has a forward PE ratio (price relative to this year's earnings) of just 24.53, so it is fair to say that a slightly more value-oriented path may be ahead for Burlington Stores 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, Burlington Stores has a P/S ratio of about 1.19. This is substantially lower than the S&P 500 average, which comes in at 3.17 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.

If anything, this suggests some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, Burlington Stores 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 BURL a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Burlington Stores is just 1.55, a level that is slightly lower than the industry average of 1.79. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Clearly, BURL is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Burlington Stores 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 BURL 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 encouraging. The full-year 2018 has seen seven estimates go higher in the past sixty days, compared to none lower, while the full-year 2019 estimate has seen six upward and no downward revisions in the same time period.

This has had a favorable impact on the consensus estimate, as the full-year 2018 consensus estimate has inched up by 1.5% in the past two months, while the full-year 2019 estimate has risen by about 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

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

Burlington Stores is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (top 41% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. However, over the past one year, the Zacks Retail - Discount Stores sector has clearly underperformed the broader market, as you can see below:

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Despite positive estimate revision activity, investors should wait for industry trends to turn around first.  When it does, this stock could be a compelling value pick.

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