Full access to Entrepreneur for $5
Subscribe

Should Value Investors Pick SL Green Realty (SLG) Stock Now?

Is SL Green Realty (SLG) a great pick from the value investor's perspective right now? Read on to know more.

By
This story originally appeared on Zacks

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 SL Green Realty Corp. SLG 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:

- Zacks

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, SL Green has a trailing twelve months PE ratio of 10.5, as you can see in the chart below:

 

Zacks Investment Research

Image Source: 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 25.2. If we focus on the long-term PE trend, SL Green’s current PE level puts it slightly above its midpoint over the past five years.

Zacks Investment Research

Image Source: Zacks Investment Research

Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 16.2. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Zacks Investment Research

Image Source: Zacks Investment Research

We should also point out that SL Green has a forward PE ratio (price relative to this year’s earnings) of just 10.7, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management, and (b) are less affected by variation in accounting policies between different companies.



The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.



In this case, SL Green’s P/CF ratio of 11.5 is lower than the industry’s figure of 23.7, which indicates that the stock is undervalued in this respect.

Zacks Investment Research

Image Source: Zacks Investment Research

Broad Value Outlook

In aggregate, SL Green 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 SL Green a solid choice for value investors, and another key metric makes this pretty clear too.



For example, the P/S ratio (another great indicator of value) comes in at 5.3, (which is somewhat better than the industry average of 7.7). Clearly, SLG is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though SL Green 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 D and a Momentum score of C. This gives SLG 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 mixed at best. The current quarter has seen one estimate go higher and fives estimates go down in the past sixty days, while the full year estimate has seen five up and two down in the same time period.



As a result, the consensus estimate for the current quarter has fallen by 3% while the same for full year has improved 0.3%in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

 

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

SL Green Realty 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 33%) 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

Image Source: 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.



Tech IPOs With Massive Profit Potential

In the past few years, many popular platforms and like Uber and Airbnb finally made their way to the public markets. But the biggest paydays came from lesser-known names.

For example, electric carmaker X Peng shot up +299.4% in just 2 months. Think of it this way…

If you had put $5,000 into XPEV at its IPO in September 2020, you could have cashed out with $19,970 in November.

With record amounts of cash flooding into IPOs and a record-setting stock market, this year’s lineup could be even more lucrative.

See Zacks Hottest Tech IPOs 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

 

SL Green Realty Corporation (SLG): Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research