Is Affiliated Managers' (AMG) a Good Value Investor Stock?

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 Affiliated Managers Group, Inc. AMG 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, Affiliated Managers’ has a trailing twelve months PE ratio of 4.88, as you can see in the chart below:

 
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.47. If we focus on the long-term PE trend, Affiliated Managers’ current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.

 
Moreover, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 12.67. At the very least, this indicates that the stock is slightly undervalued right now, compared to its peers.

 
We should also point out that Affiliated Managers’ has a forward PE ratio (price relative to this year’s earnings) of just 5.88, so it is fair to expect an increase in the company’s share price 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, Affiliated Managers’ has a P/S ratio of about 1.5. This is relatively lower than the S&P 500 average, which comes in at 3.47 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.

 
If anything, AMG is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, Affiliated Managers’ 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 Affiliated Managers’ a solid choice for value investors.

For example, the PEG ratio for Affiliated Managers’ is just 0.49, a level that is lower than the industry average of 1.57. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate.  Its P/CF ratio (another great indicator of value) for Affiliated Managers’ comes in at 3.84, which is better than the industry average of 7.98. Clearly, AMG is a solid choice on the value front from multiple angles.

What about the Stock Overall?

Though Affiliated Managers’ 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 F and a Momentum score of A. This gives AMG a Zacks VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen two upward revisions in the past sixty days compared to one downward revision, while the full year 2021 estimate has seen three upward revisions compared to one downward revisions in the same time period.

The current year consensus estimate has declined 1.47% in the past two months, whereas the full year 2021 estimates fallen 1.78% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Affiliated Managers Group, Inc. Price and Consensus

Affiliated Managers Group, Inc. Price and Consensus

Affiliated Managers Group, Inc. price-consensus-chart | Affiliated Managers Group, Inc. Quote

Even with a positive estimate trend, the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.

Bottom Line

Affiliated Managers’ is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a Zacks Rank #3, it is hard to get too excited about this company overall.  In fact, over the past two years, the Zacks Finance sector has clearly underperformed the market at large, as you can see below:

 
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.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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
 
Affiliated Managers Group, Inc. (AMG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research