Investors interested in stocks from the Chemical - Specialty sector have probably already heard of Ashland (ASH) and Livent (LTHM). 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ashland and Livent are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that ASH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
ASH currently has a forward P/E ratio of 31.40, while LTHM has a forward P/E of 50.11. We also note that ASH has a PEG ratio of 2.93. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LTHM currently has a PEG ratio of 5.05.
Another notable valuation metric for ASH is its P/B ratio of 1.38. 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, LTHM has a P/B of 1.67.
These are just a few of the metrics contributing to ASH's Value grade of B and LTHM's Value grade of D.
ASH has seen stronger estimate revision activity and sports more attractive valuation metrics than LTHM, so it seems like value investors will conclude that ASH is the superior option right now.
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Ashland Global Holdings Inc. (ASH): Free Stock Analysis Report
Livent Corporation (LTHM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.