KE vs. ROK: Which Stock Is the Better Value Option?
Investors interested in Electronics - Miscellaneous Products stocks are likely familiar with Kimball Electronics (KE) and Rockwell Automation (ROK). But which of these two stocks presents investors with the better value opportunity right now? 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.
Kimball Electronics and Rockwell Automation are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that KE likely has seen a stronger improvement to its earnings outlook than ROK has recently. 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 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.
KE currently has a forward P/E ratio of 16.46, while ROK has a forward P/E of 31.84. We also note that KE has a PEG ratio of 0.82. 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. ROK currently has a PEG ratio of 2.46.
Another notable valuation metric for KE is its P/B ratio of 1.02. 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, ROK has a P/B of 13.39.
These metrics, and several others, help KE earn a Value grade of A, while ROK has been given a Value grade of D.
KE 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 KE is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
