Investors looking for stocks in the Chemical - Diversified sector might want to consider either Olin (OLN) or Air Products and Chemicals (APD). 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.
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.
Right now, Olin is sporting a Zacks Rank of #2 (Buy), while Air Products and Chemicals 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 OLN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
OLN currently has a forward P/E ratio of 11.73, while APD has a forward P/E of 21.68. We also note that OLN has a PEG ratio of 1.65. 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. APD currently has a PEG ratio of 2.12.
Another notable valuation metric for OLN is its P/B ratio of 2.49. 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, APD has a P/B of 4.03.
These are just a few of the metrics contributing to OLN's Value grade of A and APD's Value grade of C.
OLN 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 OLN is likely the superior value option right now.
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