Investors interested in Mining - Miscellaneous stocks are likely familiar with Rio Tinto (RIO) and Wheaton Precious Metals Corp. (WPM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Rio Tinto is sporting a Zacks Rank of #2 (Buy), while Wheaton Precious Metals Corp. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that RIO likely has seen a stronger improvement to its earnings outlook than WPM has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
RIO currently has a forward P/E ratio of 11.46, while WPM has a forward P/E of 39.94. We also note that RIO has a PEG ratio of 0.91. 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. WPM currently has a PEG ratio of 1.56.
Another notable valuation metric for RIO is its P/B ratio of 1.48. 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, WPM has a P/B of 5.89.
These metrics, and several others, help RIO earn a Value grade of A, while WPM has been given a Value grade of D.
RIO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that RIO is likely the superior value option right now.
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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.
