Investors with an interest in Transportation - Equipment and Leasing stocks have likely encountered both Herc Holdings (HRI) and Westinghouse Air Brake Technologies (WAB). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Herc Holdings and Westinghouse Air Brake Technologies are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
HRI currently has a forward P/E ratio of 21.19, while WAB has a forward P/E of 24.56. We also note that HRI has a PEG ratio of 1.62. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WAB currently has a PEG ratio of 1.69.
Another notable valuation metric for HRI is its P/B ratio of 2.7. 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, WAB has a P/B of 3.39.
These metrics, and several others, help HRI earn a Value grade of A, while WAB has been given a Value grade of D.
Both HRI and WAB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HRI 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.
