Investors with an interest in Building Products - Heavy Construction stocks have likely encountered both Great Lakes Dredge & Dock (GLDD) and Dycom Industries (DY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Both Great Lakes Dredge & Dock and Dycom Industries have a Zacks Rank of #1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
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 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.
GLDD currently has a forward P/E ratio of 12.11, while DY has a forward P/E of 24.26. We also note that GLDD has a PEG ratio of 1.01. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DY currently has a PEG ratio of 1.32.
Another notable valuation metric for GLDD is its P/B ratio of 1.63. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DY has a P/B of 5.3.
Based on these metrics and many more, GLDD holds a Value grade of A, while DY has a Value grade of C.
Both GLDD and DY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GLDD is the superior value option right now.
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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.
