Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either A.O. Smith (AOS) or Kone Oyj Unsponsored ADR (KNYJY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
A.O. Smith has a Zacks Rank of #2 (Buy), while Kone Oyj Unsponsored ADR has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AOS has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AOS currently has a forward P/E ratio of 19.90, while KNYJY has a forward P/E of 22.66. We also note that AOS has a PEG ratio of 2.21. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. KNYJY currently has a PEG ratio of 2.40.
Another notable valuation metric for AOS is its P/B ratio of 5.93. 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, KNYJY has a P/B of 8.54.
These are just a few of the metrics contributing to AOS's Value grade of B and KNYJY's Value grade of C.
AOS stands above KNYJY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AOS is the superior value option right now.
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