Investors looking for stocks in the Manufacturing - General Industrial sector might want to consider either Colfax (CFX) or Barnes Group (B). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Colfax and Barnes Group are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CFX has an improving earnings outlook. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CFX currently has a forward P/E ratio of 15.40, while B has a forward P/E of 20.95. We also note that CFX has a PEG ratio of 1.21. 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. B currently has a PEG ratio of 5.24.
Another notable valuation metric for CFX is its P/B ratio of 1.16. 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, B has a P/B of 2.93.
These metrics, and several others, help CFX earn a Value grade of B, while B has been given a Value grade of C.
CFX 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 CFX is likely the superior value option right now.
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