Investors looking for stocks in the Diversified Operations sector might want to consider either ITT (ITT) or Danaher (DHR). 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.
ITT and Danaher are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ITT 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.
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.
ITT currently has a forward P/E ratio of 15.10, while DHR has a forward P/E of 22.17. We also note that ITT has a PEG ratio of 1.23. 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. DHR currently has a PEG ratio of 1.96.
Another notable valuation metric for ITT is its P/B ratio of 2.33. 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, DHR has a P/B of 2.53.
These are just a few of the metrics contributing to ITT's Value grade of B and DHR's Value grade of D.
ITT stands above DHR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ITT is the superior value option right now.