PRU vs. RDN: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Insurance - Multi line sector might want to consider either Prudential (PRU) or Radian (RDN). 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.
Currently, Prudential has a Zacks Rank of #2 (Buy), while Radian has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PRU is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
PRU currently has a forward P/E ratio of 8, while RDN has a forward P/E of 8.37. We also note that PRU has a PEG ratio of 0.89. 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. RDN currently has a PEG ratio of 1.67.
Another notable valuation metric for PRU is its P/B ratio of 0.85. 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, RDN has a P/B of 1.41.
Based on these metrics and many more, PRU holds a Value grade of A, while RDN has a Value grade of C.
PRU has seen stronger estimate revision activity and sports more attractive valuation metrics than RDN, so it seems like value investors will conclude that PRU is the superior option right now.
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Prudential Financial, Inc. (PRU): Free Stock Analysis Report
Radian Group Inc. (RDN): 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.