ACM vs. J: Which Stock Is the Better Value Option?

Investors looking for stocks in the Engineering - R and D Services sector might want to consider either Aecom Technology (ACM) or Jacobs Engineering (J). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Aecom Technology is sporting a Zacks Rank of #2 (Buy), while Jacobs Engineering has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ACM is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

ACM currently has a forward P/E ratio of 14.93, while J has a forward P/E of 16.95. We also note that ACM has a PEG ratio of 1.21. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. J currently has a PEG ratio of 1.50.

Another notable valuation metric for ACM is its P/B ratio of 2. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, J has a P/B of 2.23.

These metrics, and several others, help ACM earn a Value grade of A, while J has been given a Value grade of C.

ACM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ACM is likely the superior value option right now.

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