Investors interested in stocks from the Mining - Miscellaneous sector have probably already heard of Billiton (BBL) and Silica Holdings (SLCA). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Billiton is sporting a Zacks Rank of #2 (Buy), while Silica Holdings has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BBL has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
BBL currently has a forward P/E ratio of 12.98, while SLCA has a forward P/E of 206.96. We also note that BBL has a PEG ratio of 2.45. 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. SLCA currently has a PEG ratio of 14.78.
Another notable valuation metric for BBL is its P/B ratio of 0.91. 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, SLCA has a P/B of 1.06.
Based on these metrics and many more, BBL holds a Value grade of A, while SLCA has a Value grade of D.
BBL stands above SLCA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBL is the superior value option right now.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.