Investors looking for stocks in the Chemical - Specialty sector might want to consider either H. B. Fuller (FUL) or Ecolab (ECL). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
H. B. Fuller and Ecolab are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. This means that FUL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
FUL currently has a forward P/E ratio of 18.04, while ECL has a forward P/E of 43.27. We also note that FUL has a PEG ratio of 2.31. 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. ECL currently has a PEG ratio of 4.13.
Another notable valuation metric for FUL is its P/B ratio of 1.97. 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, ECL has a P/B of 6.80.
These metrics, and several others, help FUL earn a Value grade of A, while ECL has been given a Value grade of F.
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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H. B. Fuller Company (FUL): Free Stock Analysis Report
Ecolab Inc. (ECL): 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.