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 attractive buys, or offer great discounts off their fair value?

One way to find these companies is to look at several key financial metrics and ratios, many of which are crucial in the value stock picking process. Let’s put Rental center RCII stock into this equation and find out if this is a good choice for value investors right now, or if investors who subscribe to this methodology should look elsewhere for the best choices:

P / E ratio

A key metric that value investors always look at is the price-to-earnings ratio, or PE for short. It shows us how much investors are willing to pay for every dollar of profit in any 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 this 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 this front, RentACenter has a year-over-year PE ratio of 8.96, as you can see in the graph below:

Image source: Zacks Investment Research

This level actually compares quite favorably with the market as a whole, as the PE for the S&P 500 is around 23.81. If we focus on the long term trend of PE, RentACenter’s current PE level puts it below its midpoint (which is 12.16) for the past five years. Additionally, the current level sits well below the title’s highs, suggesting it may be a solid entry point.

Image source: Zacks Investment Research

Additionally, the stock’s PE compares favorably to Zacks’ 12-month consumer discretionary PE ratio of 66.51. At the very least, it indicates that the title is currently relatively undervalued compared to its peers.

Image source: Zacks Investment Research

We should also point out that RentACenter has a forward PE (price to earnings for this year) ratio of just 7.69, so it’s fair to say that a slightly more value-driven path may be ahead for them. Short-term RentACenter actions as well.

P / S Ratio

Another key indicator to note is the price / 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 value metric more than others because it looks at sales, something that is much more difficult to manipulate with accounting tricks than profits.

Right now, RentACenter has a P / S ratio of around 0.81. That’s a little lower than the S&P 500 average, which currently sits at 4.94x. Additionally, as we can see in the chart below, this is well below the highs of this particular stock in recent years.

Image source: Zacks Investment Research

On the contrary, it suggests some level of undervalued trading, at least by historical standards.

Broad value outlook

Overall, RentACenter currently has a value score of A which places it in the top 20% of all stocks we cover from this look. This makes RentACenter a solid choice for value investors, and some of its other key metrics show that quite clearly as well.

For example, the PEG ratio for RentACenter is only 0.22, well below the industry average of 1.41. The PEG ratio is a modified PE ratio that takes into account the growth rate of the stock’s earnings. Obviously, AAPL is a solid choice in terms of value from several angles.

What about the stock as a whole?

While RentACenter can be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it should be noted that the company has a Growth score of A and a Momentum score of B. This gives RCII a Zacks VGM score – or its overall fundamental score – of A. (You can read more about it at Zacks style scores here >>)

Meanwhile, the company’s recent earnings estimates have been dismal at best. The current quarter has seen one estimate increase in the last sixty days compared to three decreasing, while the estimate for the entire year has seen none increase and six decrease during the same period. .

This had only a small impact on the consensus estimate, as the consensus estimate for the current quarter has decreased by 10.3% in the past two months, while the estimate for the entire year has declined. slightly down by 3.4%. You can see the trend of the consensus estimate and recent stock price development in the chart below:

RentACenter, Inc. Price and consensus

RentACenter, Inc. price-consensus-chart | RentACenter, Inc.

This negative trend is why the stock only has a Zacks Rank # 3 (Hold) despite high value metrics and why we are looking for short term online performance of the company.

Final result

RentACenter is an inspired choice for value-driven investors, as it’s hard to beat its incredible range of stats on this front. In addition, a strong industry ranking (among the top 33% of over 250 industries) inspires our confidence. However, over the past couple of years, the consumer services sector of Zacks – Miscellaneous has clearly underperformed the broader market, as you can see below:

Image source: Zacks Investment Research

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.