RITM vs. BAM: Which Stock Is the Better Value Option?
Investors interested in Financial - Miscellaneous Services stocks are likely familiar with Rithm (RITM) and Brookfield Asset Management (BAM). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Rithm has a Zacks Rank of #2 (Buy), while Brookfield Asset Management has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that RITM likely has seen a stronger improvement to its earnings outlook than BAM has recently. But this is just one factor that value investors are interested in.
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.
RITM currently has a forward P/E ratio of 4.02, while BAM has a forward P/E of 24.09. We also note that RITM has a PEG ratio of 0.57. 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. BAM currently has a PEG ratio of 1.75.
Another notable valuation metric for RITM is its P/B ratio of 0.68. 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, BAM has a P/B of 7.93.
Based on these metrics and many more, RITM holds a Value grade of B, while BAM has a Value grade of F.
RITM has seen stronger estimate revision activity and sports more attractive valuation metrics than BAM, so it seems like value investors will conclude that RITM is the superior option right now.
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This article originally published on Zacks Investment Research (zacks.com).
