Investors looking for stocks in the Manufacturing - General Industrial sector might want to consider either Wolseley PLC (FERG) or Atlas Copco AB (ATLKY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Wolseley PLC has a Zacks Rank of #2 (Buy), while Atlas Copco AB has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FERG has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
FERG currently has a forward P/E ratio of 12.13, while ATLKY has a forward P/E of 24. We also note that FERG has a PEG ratio of 1.10. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ATLKY currently has a PEG ratio of 3.55.
Another notable valuation metric for FERG is its P/B ratio of 5.95. 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, ATLKY has a P/B of 6.53.
These metrics, and several others, help FERG earn a Value grade of B, while ATLKY has been given a Value grade of D.
FERG stands above ATLKY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FERG is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Wolseley PLC (FERG) : Free Stock Analysis Report
Atlas Copco AB (ATLKY) : Free Stock Analysis Report
To read this article on Zacks.com click here.