Investors interested in stocks from the Technology Services sector have probably already heard of Nomura Research Institute (NRILY) and Trane Technologies (TT). 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.
Nomura Research Institute and Trane Technologies are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that NRILY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
NRILY currently has a forward P/E ratio of 22.91, while TT has a forward P/E of 32.33. We also note that NRILY has a PEG ratio of 1.84. 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. TT currently has a PEG ratio of 2.51.
Another notable valuation metric for NRILY is its P/B ratio of 5.46. 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, TT has a P/B of 12.28.
Based on these metrics and many more, NRILY holds a Value grade of B, while TT has a Value grade of D.
NRILY 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 NRILY is likely 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.
