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Valuation Dashboard: Industrials - Update

Summary

  • Valuation metrics in Industrials.
  • Evolution since last month.
  • A list of stocks looking cheap in their industries.

This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages in each industry.

Executive summary

Airlines are attractive on Price/Earnings (P/E) and Return on Equity (ROE) basis, but not for other factors. Marine looks a bit like a value trap with 3 good valuation factors and the worst ROE. Research/Consulting and Facilities Services look moderately overpriced and close to their historical averages in profitability. Trading Companies are not far behind. Electronic Equipment also look only slightly overvalued, but their profitability is far below the baseline. Other groups are even less attractive. Conglomerates, Airfreight/Logistics and Machinery look the most overpriced.

Since the last issue on Industrials:

  • P/E has improved in Aerospace/Defense, Building Products, Construction, Conglomerates, Trading Companies, Facilities Services, Airfreight and Airport Services, and deteriorated in Machinery, Research/Consulting, Airlines, and Railroads.

  • P/S has improved in Construction, Trading Companies, Facilities Services, Airport Services and Marine, and deteriorated elsewhere.

  • P/FCF has improved in Aerospace/Defense, Construction, Electric Equipment and Facilities Services, and deteriorated elsewhere.

  • ROE has improved in Aerospace/Defense, Research/Consulting and Airport Services, deteriorated in Electric Equipment, and is stable elsewhere.

  • In 1 month, the Industrial Select Sector SPDR ETF (NYSEARCA:XLI) has outperformed the SPDR S&P 500 ETF (SPY) by about 1.5%.

  • The 5 S&P 500 industrial companies with the best momentum in 1 month are Acuity Brands Inc. (AYI), Boeing Co. (BA), Kansas City Southern (KSU), Southwest Airlines Co. (LUV), and United Rentals Inc. (URI).

Some cheap stocks in their industries

The stocks listed below are in the S&P 1500 index, and are cheaper than their respective industry factor for Price/Earnings, Price/Sales and Price/Free Cash Flow. The 10 companies with the highest Return on Equity are kept in the final selection. I update every month 8 lists like this

This article was written by

Fred Piard profile picture
15.37K Followers

Fred Piard, PhD. is a quantitative analyst and IT professional with over 30 years of experience working in technology. He is the author of three books and has been investing in data-driven systematic strategies since 2010.

Fred runs the investing group Quantitative Risk & Value where he shares a portfolio invested in quality dividend stocks, and companies at the forefront of tech innovation. Fred also supplies market risk indicators, a real estate strategy, a bond strategy, and an income strategy in closed-end funds. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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