Investors looking for stocks in the Industrial Services sector might want to consider either ScanSource (SCSC) or SiteOne Landscape (SITE). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both ScanSource and SiteOne Landscape are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SCSC currently has a forward P/E ratio of 11.17, while SITE has a forward P/E of 39.26. We also note that SCSC has a PEG ratio of 0.74. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SITE currently has a PEG ratio of 2.34.
Another notable valuation metric for SCSC is its P/B ratio of 1.11. 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, SITE has a P/B of 3.73.
These metrics, and several others, help SCSC earn a Value grade of A, while SITE has been given a Value grade of C.
Both SCSC and SITE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SCSC is 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.
