Investors interested in stocks from the Engineering - R and D Services sector have probably already heard of Amentum Holdings (AMTM) and Sterling Infrastructure (STRL). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Amentum Holdings and Sterling Infrastructure are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
AMTM currently has a forward P/E ratio of 10.60, while STRL has a forward P/E of 23.70. We also note that AMTM has a PEG ratio of 0.82. 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. STRL currently has a PEG ratio of 1.58.
Another notable valuation metric for AMTM is its P/B ratio of 1.21. 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, STRL has a P/B of 7.47.
These metrics, and several others, help AMTM earn a Value grade of A, while STRL has been given a Value grade of C.
Both AMTM and STRL are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AMTM is the superior value option right now.
Zacks' Research Chief Names "Stock Most Likely to Double"
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Free: See Our Top Stock And 4 Runners UpAmentum Holdings, Inc. (AMTM) : Free Stock Analysis Report
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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.
