Should Value Investors Choose Bausch Health (BHC) Stock Now? – January 31, 2022

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 go unnoticed and are compelling buys, or that offer tempting discounts from their fair value?

One way to find these companies is to look at several key metrics and financial ratios, many of which are crucial in the value-oriented stock selection process. let’s say Bausch Health Companies Inc. (BHC Free Report) stock into this equation and find out if it’s a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for the best picks:

P/E ratio

A key metric that value investors always look at is the price-to-earnings ratio, or PE for short. It tells us how much investors are willing to pay for every dollar of profit from a given stock, and it’s 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 that ratio has been in the past; b) how it compares to the industry/sector average; and c) how it compares to the market as a whole.

On that front, Bausch Health has a year-over-year PE ratio of 5.38, as you can see in the table below:

Image source: Zacks Investment Research

This level actually compares quite favorably to the market as a whole, as the PE of the S&P 500 sits at around 23.05. If we focus on the long-term trend of the PE, the current level of Bausch Health’s PE puts it below its midpoint over the past five years.

Zacks Investment ResearchImage source: Zacks Investment Research

Additionally, the stock’s PE also compares favorably to the sector’s trailing 12-month PE ratio of 26.05. If nothing else, this indicates that the stock is currently relatively undervalued compared to its peers.

Zacks Investment ResearchImage source: Zacks Investment Research

We should also point out that Bausch Health has a forward PE ratio (price to earnings this year) of just 5.06, so it’s fair to say that a slightly more value-oriented trajectory may be ahead for the Bausch Health stock in the short term. too much.

P/S ratio

Another key metric to note is the price-to-sales ratio. This approach compares the price of a given stock to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused metrics because it looks at sales, which is much harder to manipulate with accounting tricks than profits.

Currently, Bausch Health has a P/S ratio of approximately 1.04. That’s below the S&P 500 average, which currently sits at 4.79. As we can see in the chart below, this is above the median for this particular stock over the past few years.

Zacks Investment ResearchImage source: Zacks Investment Research

BHC is actually in the upper zone of its trading range during the period according to the P/S metric, suggesting that the company’s stock price has already appreciated to some extent against to its sales.

Overall value outlook

Overall, Bausch Health currently has a Zacks Value Style Score of A, which puts it in the top 20% of all stocks we cover from this look. This makes Bausch Health a solid choice for value investors, and some of its other key metrics show this quite clearly as well.

For example, the PEG ratio for Bausch Health is 0.25, a level below the industry average of 0.55. The PEG ratio is a modified PE ratio that takes into account the earnings growth rate of the stock. Additionally, its P/CF ratio (another excellent value indicator) sits at 2.59, which is much better than the industry average of 10.19. Clearly, BHC is a solid choice on the value front from multiple angles.

What about the overall stock?

Although Bausch Health may be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it’s worth noting that the company has a Growth Rating of C and a Momentum Score of A. This gives BHC a Zacks VGM Score – or its overall Fundamental Rating – of A. (You can read more at Zacks style scores here >>)

Meanwhile, recent earnings estimates for the company have been mixed at best. The current quarter has not seen any revisions in the estimate in the last sixty days, while the estimate for the full year has seen no upward revisions and two downward revisions in the same period.

As a result, the consensus estimate for the current quarter has remained unchanged for the past two months, while the estimate for the full year has increased by 0.8%. You can see the trend of the consensus estimate and the recent price action of the stock in the chart below:

This somewhat mixed trend explains why the stock only has a Zacks rank of #3 (holding) and why we’re looking at the company’s online performance in the near term.

Conclusion

Bausch Health is an inspired choice for value investors, as it’s hard to beat its incredible lineup of stats on this front. However, with a sluggish industry ranking (in the bottom 9%) and a #3 Zacks ranking, it’s hard to get too excited about this company as a whole. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:

Zacks Investment ResearchImage source: Zacks Investment Research

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