Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of Quanex Building Products (NX) and Construction Partners (ROAD). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Quanex Building Products and Construction Partners are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NX has an improving earnings outlook. But this is only part of the picture for value investors.
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.
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.
NX currently has a forward P/E ratio of 7.78, while ROAD has a forward P/E of 37.71. We also note that NX has a PEG ratio of 0.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ROAD currently has a PEG ratio of 0.95.
Another notable valuation metric for NX is its P/B ratio of 0.96. 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, ROAD has a P/B of 5.08.
Based on these metrics and many more, NX holds a Value grade of B, while ROAD has a Value grade of C.
NX sticks out from ROAD in both our Zacks Rank and Style Scores models, so value investors will likely feel that NX is the better option right now.
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Today, See These 5 Potential Home Runs >>Quanex Building Products Corporation (NX) : Free Stock Analysis Report
Construction Partners, Inc. (ROAD) : 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.
