Is Ryder System 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 if Ryder System, Inc. (NYSE:R) 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, Ryder System has a trailing twelve months PE ratio of 16.18, 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 20.04. If we focus on the stock’s long-term PE trend, the current level puts Ryder System’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.

Further, the stock’s PE also compares favorably with the broader industry’s trailing twelve months PE ratio, which stands at 17.63. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Ryder System has a forward PE ratio (price relative to this year’s earnings) of 16.79 , which is tad higher than the current level. So it is fair to expect an increase in the company’s share price 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, Ryder System has a P/S ratio of about 0.56. This is significantly lower than the S&P 500 average, which comes in at 3.16 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, Ryder System currently has a Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Ryder System a solid choice for value investors, and some of its other key metrics make this pretty clear too.

What About the Stock Overall?

Though Ryder System 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 ‘C’ and a Momentum score of ‘D’. This gives R 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 favorable. Both the current year and next have seen five estimates go higher in the past sixty days compared to one lower.

This has had just a small impact on the consensus estimate though as the current year consensus estimate has risen by 1.4% in the past two months, while the next year estimate has inched upper by 2.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Ryder System, Inc. Price and Consensus

The stock has just a Zacks Rank #3 (Hold) and we are looking for in-line performance from the company in the near term.

Bottom Line

Ryder System is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a strong industry rank (among Top 44% of more than 250 industries) instills our confidence on the stock.

In fact, over the past two years, the broader 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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