Investors interested in stocks from the Manufacturing - Electronics sector have probably already heard of Powell Industries (POWL) and Eaton (ETN). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Powell Industries has a Zacks Rank of #1 (Strong Buy), while Eaton has a Zacks Rank of #2 (Buy) right now. This means that POWL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
POWL currently has a forward P/E ratio of 13, while ETN has a forward P/E of 26.85. We also note that POWL has a PEG ratio of 0.93. 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. ETN currently has a PEG ratio of 2.21.
Another notable valuation metric for POWL is its P/B ratio of 4.28. 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, ETN has a P/B of 5.96.
These are just a few of the metrics contributing to POWL's Value grade of B and ETN's Value grade of C.
POWL stands above ETN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that POWL is the superior value option right now.
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Free: See Our Top Stock And 4 Runners UpPowell Industries, Inc. (POWL) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
