Investors with an interest in Engineering - R and D Services stocks have likely encountered both Quanta Services (PWR) and Jacobs Engineering (JEC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Quanta Services has a Zacks Rank of #1 (Strong Buy), while Jacobs Engineering has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PWR is likely seeing its earnings outlook improve to a greater extent. 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.
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.
PWR currently has a forward P/E ratio of 10.01, while JEC has a forward P/E of 14. We also note that PWR has a PEG ratio of 1.25. 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. JEC currently has a PEG ratio of 1.45.
Another notable valuation metric for PWR is its P/B ratio of 1.43. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, JEC has a P/B of 1.72.
These metrics, and several others, help PWR earn a Value grade of A, while JEC has been given a Value grade of C.
PWR has seen stronger estimate revision activity and sports more attractive valuation metrics than JEC, so it seems like value investors will conclude that PWR is the superior option right now.