RBC vs. AOS: Which Stock Is the Better Value Option?
Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Regal Beloit (RBC) and A.O. Smith (AOS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Regal Beloit has a Zacks Rank of #2 (Buy), while A.O. Smith has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RBC is likely seeing its earnings outlook improve to a greater extent. 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.
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.
RBC currently has a forward P/E ratio of 21.33, while AOS has a forward P/E of 30.20. We also note that RBC has a PEG ratio of 2.13. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AOS currently has a PEG ratio of 3.77.
Another notable valuation metric for RBC is its P/B ratio of 1.75. 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, AOS has a P/B of 6.42.
These are just a few of the metrics contributing to RBC's Value grade of B and AOS's Value grade of C.
RBC stands above AOS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RBC is the superior value option right now.
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Regal Beloit Corporation (RBC): Free Stock Analysis Report
A. O. Smith Corporation (AOS): Free Stock Analysis Report
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