Is Shaw Communications (SJR) 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 Shaw Communications (NYSE:SJR) Inc. SJR 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, Shaw Communications has a trailing twelve months PE ratio of 19.10, as you can see in the chart below:

Zacks Investment Research

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 24.51. If we focus on the long-term PE trend, Shaw Communications’ current PE level puts it above its midpoint over the past five years.

Zacks Investment Research

Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 70.38. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Zacks Investment Research

However, we should point out that Shaw Communications has a forward PE ratio (price relative to this year’s earnings) of 23.56, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.

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, Shaw Communications has a P/S ratio of about 3.42. This is lower than the S&P 500 average, which comes in at 5.08 right now. As we can see in the chart below, this is above the median for this stock in particular over the past few years.

Zacks Investment Research

SJR is actually in the higher zone of its trading range in the time period per the 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, Shaw Communications 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 Shaw Communications a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, its P/CF ratio (another great indicator of value) comes in at 8.46, which is far better than the industry average of 11.81. Clearly, SJR is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Shaw Communications 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 F. This gives SJR 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 mixed at best. The current fiscal quarter has not seen any estimate revisions in the past sixty days, while the fiscal full year estimate has seen one upward and two downward revisions in the same time period.

As a result, the current fiscal quarter consensus estimate has risen by 7.1% in the past two months, while the fiscal full year estimate has inched lower by 0.8%.

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Shaw Communications is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the bottom 18%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:

Zacks Investment Research

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

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Shaw Communications Inc. (SJR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research