Is Terex (TEX) now a worthwhile choice for value investors?

Value investing is undoubtedly one of the most popular methods for finding great stocks in any market environment. After all, who wouldn’t want to find stocks that either fly under the radar and represent attractive buying opportunities or offer tempting discounts compared to fair value?

One way to find these companies is to look at several key metrics and financial ratios, many of which are critical when selecting value stocks. Terex Corporation Consider TEX stock in this equation and find out if it’s a good choice for value investors right now or if investors following this method should look elsewhere for top picks:

P/E

One important metric that value investors always look at is the price-to-earnings ratio (or P/E ratio for short). It tells us how much investors are willing to pay for each dollar of earnings from a given stock and is undoubtedly one of the most popular financial metrics in the world. The P/E ratio is best used to compare the stock’s current P/E ratio to: a) its previous P/E ratio, b) the industry average, and c) the overall market.

In this regard, Terex has a P/E ratio of 12.27 for the last twelve months, as you can see in the following chart:

This level is actually cheap compared to the overall market, as the P/E ratio for the S&P 500 is around 18.16. If we focus on the long-term P/E trend, Terex’s current P/E level is below its average over the last five years.

In addition, the stock’s P/E ratio also compares favorably to the Zacks Manufacturing-Construction and Mining Industry’s trailing-twelve-month P/E ratio of 12.59, which at least suggests that the stock is currently relatively undervalued compared to its peers.

We should also point out that Terex’s P/E ratio is only 8.72 on an annual basis, so it’s safe to assume that Terex could also see a somewhat more value-oriented development in the near future.

P/S ratio

Another important metric is the price-to-sales ratio. This approach compares the price of a particular stock to its total sales, with a lower value generally being considered better. Some people like this metric more than other value-based metrics because it takes into account sales, which are far more difficult to manipulate with accounting tricks than earnings.

Currently, Terex has a P/S ratio of about 0.47. This is lower than the S&P 500 average, which is currently at 3.31. As we can see in the chart below, this is also well below the highs this stock has seen in recent years.

If anything, this suggests some degree of undervalued trading – at least compared to historical norms.

Comprehensive value outlook

Overall, Terex currently has a Value Score of A, putting it in the top 20% of all stocks we cover in this report. This makes Terex a solid choice for value investors.

What is the overall situation with the stock?

While TEX could 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 Score of C and a Momentum Score of D. This gives TEX a Zacks VGM Score — or its overarching fundamental grade — of A. (Read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings forecasts have been optimistic. There have been eight upward revisions for the current year without a single downward move in the last sixty days. There have been six upward revisions for next year over the same period without a single move in the opposite direction.

This has had an impact on the consensus estimate as the consensus estimate for the current year has increased by 9.7% over the past two months, while the estimate for next year has increased by 5.7%. You can see the trend of the consensus estimate and the recent price action of the stock in the chart below:

Terex Corporation Price and Consensus

Terex Corporation Price and Consensus | Terex Corporation Quote

This positive trend indicates optimistic analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom line

Terex is an inspired choice for value investors as its incredible statistics are hard to beat in this regard. In addition, a strong industry ranking (in the top 17% of more than 250 industries) and Zacks Rank #1 reinforce our confidence. In fact, the industry has significantly outperformed the overall market over the past two years, as you can see below:

We believe that satisfactory past industry performance and a good Zacks Rank indicate that the stock is likely to benefit from favorable broader factors in the near future. Add to that robust value metrics and we believe we have a strong value candidate in Terex.

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