Investors with an interest in Financial - Investment Management stocks have likely encountered both Invesco (IVZ) and BlackRock (BLK). 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.
Currently, Invesco has a Zacks Rank of #1 (Strong Buy), while BlackRock has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that IVZ is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
IVZ currently has a forward P/E ratio of 13.60, while BLK has a forward P/E of 22.42. We also note that IVZ has a PEG ratio of 0.65. 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. BLK currently has a PEG ratio of 1.67.
Another notable valuation metric for IVZ is its P/B ratio of 1.01. 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, BLK has a P/B of 2.96.
These metrics, and several others, help IVZ earn a Value grade of B, while BLK has been given a Value grade of D.
IVZ stands above BLK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that IVZ 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.
