ECHO or ZTO: Which Is the Better Value Stock Right Now?
Investors with an interest in Transportation - Services stocks have likely encountered both Echo Global Logistics (ECHO) and ZTO Express Cayman Inc. (ZTO). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, Echo Global Logistics is sporting a Zacks Rank of #2 (Buy), while ZTO Express Cayman Inc. has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ECHO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
ECHO currently has a forward P/E ratio of 29.18, while ZTO has a forward P/E of 30.97. We also note that ECHO has a PEG ratio of 1.67. 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. ZTO currently has a PEG ratio of 2.
Another notable valuation metric for ECHO is its P/B ratio of 1.86. 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, ZTO has a P/B of 3.22.
These metrics, and several others, help ECHO earn a Value grade of A, while ZTO has been given a Value grade of C.
ECHO stands above ZTO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ECHO is the superior value option right now.
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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.