Investors looking for stocks in the Building Products - Retail sector might want to consider either Beacon Roofing Supply (BECN) or Home Depot (HD). 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Beacon Roofing Supply has a Zacks Rank of #1 (Strong Buy), while Home Depot has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BECN likely has seen a stronger improvement to its earnings outlook than HD has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BECN currently has a forward P/E ratio of 11.82, while HD has a forward P/E of 23.20. We also note that BECN has a PEG ratio of 1.29. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HD currently has a PEG ratio of 2.60.
Another notable valuation metric for BECN is its P/B ratio of 3.20. 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, HD has a P/B of 243.12.
These metrics, and several others, help BECN earn a Value grade of A, while HD has been given a Value grade of C.
BECN stands above HD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BECN is the superior value option right now.
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The Home Depot, Inc. (HD) : 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.
