Investors interested in stocks from the Chemical - Specialty sector have probably already heard of H. B. Fuller (FUL) and PPG Industries (PPG). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, H. B. Fuller is sporting a Zacks Rank of #2 (Buy), while PPG Industries 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 FUL has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FUL currently has a forward P/E ratio of 13.32, while PPG has a forward P/E of 14.04. We also note that FUL has a PEG ratio of 0.84. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PPG currently has a PEG ratio of 2.50.
Another notable valuation metric for FUL is its P/B ratio of 1.64. 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, PPG has a P/B of 3.53.
Based on these metrics and many more, FUL holds a Value grade of B, while PPG has a Value grade of C.
FUL 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 FUL is likely the superior value option right now.
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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
