Is ViacomCBS Stock Overvalued Or Undervalued?

Is ViacomCBS Stock Overvalued Or Undervalued?

Photo by Coolcaesar via Wikimedia

ViacomCBS Inc VIAC shares have lagged the S&P 500 in the last year, with a 12-month loss of 11%.

ViacomCBS’s stock has had a wild ride in 2021, but investors may be wondering whether there’s any value in ViacomCBS shares after the pullback.

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.

For comparison, the S&P 500’s PE is currently at about 30, nearly double its long-term average of 15.9. ViacomCBS’s PE is 6.3, less than a fourth of the S&P 500 average as a whole.

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% over the last five years, suggesting the stock is priced at the low end of its historical valuation range.

Finally, Wall Street analysts see value in ViacomCBS stock over the next 12 months. The average analyst price target among the 26 analysts covering ViacomCBS is $45, suggesting 40% upside from current levels.

The Verdict: At its current price, ViacomCBS stock appears to be undervalued based on a sampling of common fundamental valuation metrics.

© 2022 Benzinga does not provide investment advice. All rights reserved.

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