Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Newell Brands (NWL) and Clorox (CLX). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Newell Brands has a Zacks Rank of #1 (Strong Buy), while Clorox has a Zacks Rank of #5 (Strong Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NWL has an improving earnings outlook. However, value investors will care about much more than just this.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
NWL currently has a forward P/E ratio of 9.57, while CLX has a forward P/E of 17.96. We also note that NWL has a PEG ratio of 1.80. 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. CLX currently has a PEG ratio of 3.12.
Another notable valuation metric for NWL is its P/B ratio of 1.07. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CLX has a P/B of 50.79.
These metrics, and several others, help NWL earn a Value grade of A, while CLX has been given a Value grade of D.
NWL 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 NWL is likely the superior value option right now.
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The Clorox Company (CLX) : Free Stock Analysis Report
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.
