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ITT or DHR: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors looking for stocks in the Diversified Operations sector might want to consider either ITT (ITT) or Danaher (DHR). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

ITT has a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #3 (Hold) right now. This means that ITT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ITT currently has a forward P/E ratio of 18.75, while DHR has a forward P/E of 30.63. We also note that ITT has a PEG ratio of 1.88. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DHR currently has a PEG ratio of 2.45.

Another notable valuation metric for ITT is its P/B ratio of 3.06. 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, DHR has a P/B of 3.31.

These are just a few of the metrics contributing to ITT's Value grade of B and DHR's Value grade of F.

ITT stands above DHR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ITT is the superior value option right now.


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