Is Shire (SHPG) a Suitable Stock for Value Investors Now?
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. 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, Shire has a trailing twelve months PE ratio of 11.6, as you can see in the chart below:This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.1. If we focus on the long-term PE trend, Shire’s current PE level puts it below its midpoint over the past five years. 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, Shire has a P/S ratio of about 3.6.