Investors looking for stocks in the Transportation - Equipment and Leasing sector might want to consider either AerCap (AER) or Westinghouse Air Brake Technologies (WAB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
AerCap has a Zacks Rank of #1 (Strong Buy), while Westinghouse Air Brake Technologies has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that AER likely has seen a stronger improvement to its earnings outlook than WAB has recently. But this is just one factor that value investors are interested in.
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 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.
AER currently has a forward P/E ratio of 8.93, while WAB has a forward P/E of 22.40. We also note that AER has a PEG ratio of 0.69. 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. WAB currently has a PEG ratio of 1.54.
Another notable valuation metric for AER is its P/B ratio of 1.36. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WAB has a P/B of 3.09.
These metrics, and several others, help AER earn a Value grade of B, while WAB has been given a Value grade of D.
AER has seen stronger estimate revision activity and sports more attractive valuation metrics than WAB, so it seems like value investors will conclude that AER is the superior option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
