Investors with an interest in Diversified Operations stocks have likely encountered both Carlisle (CSL) and 3M (MMM). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Carlisle is sporting a Zacks Rank of #2 (Buy), while 3M has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that CSL likely has seen a stronger improvement to its earnings outlook than MMM has recently. But this is just one factor that value investors are interested in.
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 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.
CSL currently has a forward P/E ratio of 10.65, while MMM has a forward P/E of 12. We also note that CSL has a PEG ratio of 0.63. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MMM currently has a PEG ratio of 1.26.
Another notable valuation metric for CSL is its P/B ratio of 4.05. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MMM has a P/B of 4.89.
Based on these metrics and many more, CSL holds a Value grade of B, while MMM has a Value grade of C.
CSL has seen stronger estimate revision activity and sports more attractive valuation metrics than MMM, so it seems like value investors will conclude that CSL is the superior 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.