Investors looking for stocks in the Security and Safety Services sector might want to consider either Alarm.com Holdings (ALRM) or Assa Abloy AB (ASAZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, Alarm.com Holdings is sporting a Zacks Rank of #1 (Strong Buy), while Assa Abloy AB has a Zacks Rank of #3 (Hold). This means that ALRM'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ALRM currently has a forward P/E ratio of 21.09, while ASAZY has a forward P/E of 24.55. We also note that ALRM has a PEG ratio of 1.65. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ASAZY currently has a PEG ratio of 2.61.
Another notable valuation metric for ALRM is its P/B ratio of 3.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ASAZY has a P/B of 4.74.
These metrics, and several others, help ALRM earn a Value grade of B, while ASAZY has been given a Value grade of C.
ALRM 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 ALRM is likely 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.
