LYB vs. PPG: Which Stock Is the Better Value Option?
Investors interested in stocks from the Chemical - Diversified sector have probably already heard of LyondellBasell (LYB) and PPG Industries (PPG). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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, LyondellBasell has a Zacks Rank of #2 (Buy), while PPG Industries has a Zacks Rank of #3 (Hold). This means that LYB's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
LYB currently has a forward P/E ratio of 14.05, while PPG has a forward P/E of 25.82. We also note that LYB has a PEG ratio of 2.08. 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. PPG currently has a PEG ratio of 2.72.
Another notable valuation metric for LYB is its P/B ratio of 3.04. 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, PPG has a P/B of 5.45.
Based on these metrics and many more, LYB holds a Value grade of A, while PPG has a Value grade of D.
LYB has seen stronger estimate revision activity and sports more attractive valuation metrics than PPG, so it seems like value investors will conclude that LYB is the superior option right now.
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