ViacomCBS Inc. shares have lagged the S&P 500 in the last year, with a 12-month loss of 11 percent.
Earnings
A price-to-earnings ratio (PE) is one of the most basic fundamental metrics for gauging a stock’s value. The lower the PE, the higher the value.Growth
Looking ahead to the next four quarters, the S&P 500’s forward PE ratio looks much more reasonable at just 21.3. ViacomCBS’s forward earnings multiple of 7.8 is still less than half the S&P 500’s, making ViacomCBS look undervalued. ViacomCBS’s forward PE ratio is also less than half the average multiple of its communication services peers, which are averaging a 20.7 forward earnings multiple.Yet when it comes to evaluating a stock, earnings aren’t everything.
The growth rate is also critical for companies that are rapidly building their bottom lines. The price-to-earnings-to-growth ratio (PEG) is a good way to incorporate growth rates into the evaluation process.
The S&P 500’s overall PEG is currently about 1.0. Unfortunately, without earnings growth, ViacomCBS doesn’t have a positive PEG ratio to use as a valuation gauge.
Price-to-sales ratio is another important valuation metric, particularly for unprofitable companies and growth stocks. The S&P 500’s PS ratio is currently 3.27, well above its long-term average of 1.63. ViacomCBS’s PS ratio is 0.7, less than a fourth of the S&P 500 average as a whole. ViacomCBS’s PS ratio is also down 47.3 percent over the last five years, suggesting the stock is priced at the low end of its historical valuation range.
