Investors interested in stocks from the Electronics - Testing Equipment sector have probably already heard of Teradyne (TER) and Fortive (FTV). 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.
Teradyne has a Zacks Rank of #2 (Buy), while Fortive has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TER likely has seen a stronger improvement to its earnings outlook than FTV has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
TER currently has a forward P/E ratio of 19.52, while FTV has a forward P/E of 22.82. We also note that TER has a PEG ratio of 1.66. 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. FTV currently has a PEG ratio of 2.15.
Another notable valuation metric for TER is its P/B ratio of 4.53. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, FTV has a P/B of 4.93.
Based on these metrics and many more, TER holds a Value grade of B, while FTV has a Value grade of D.
TER 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 TER is likely 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 Teradyne, Inc. (TER): Free Stock Analysis Report Fortive Corporation (FTV): Free Stock Analysis Report To read this article on Zacks.com click here.