Investors interested in stocks from the Transportation - Equipment and Leasing sector have probably already heard of AerCap (AER) and Westinghouse Air Brake Technologies (WAB). 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.
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 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, AerCap is sporting a Zacks Rank of #1 (Strong Buy), while Westinghouse Air Brake Technologies 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 AER 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 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.
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.
AER currently has a forward P/E ratio of 9.48, while WAB has a forward P/E of 23.45. We also note that AER has a PEG ratio of 0.73. 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. WAB currently has a PEG ratio of 1.62.
Another notable valuation metric for AER is its P/B ratio of 1.44. 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, WAB has a P/B of 3.23.
These are just a few of the metrics contributing to AER's Value grade of B and WAB's Value grade of D.
AER stands above WAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AER is the superior value 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.
