MWA or NDSN: Which Is the Better Value Stock Right Now?
Investors interested in Manufacturing - General Industrial stocks are likely familiar with Mueller Water Products (MWA) and Nordson (NDSN). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Mueller Water Products and Nordson have a Zacks Rank of #2 (Buy) right now. 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 only part of the picture 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
MWA currently has a forward P/E ratio of 14.44, while NDSN has a forward P/E of 26.14. We also note that MWA has a PEG ratio of 0.96. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NDSN currently has a PEG ratio of 2.01.
Another notable valuation metric for MWA is its P/B ratio of 3.19. 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, NDSN has a P/B of 5.27.
These metrics, and several others, help MWA earn a Value grade of B, while NDSN has been given a Value grade of F.
Both MWA and NDSN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MWA is the superior value option right now.
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Nordson Corporation (NDSN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
