Investors interested in Engineering - R and D Services stocks are likely familiar with Sterling Infrastructure (STRL) and Aecom Technology (ACM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Sterling Infrastructure has a Zacks Rank of #2 (Buy), while Aecom Technology has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STRL has an improving earnings outlook. 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.
STRL currently has a forward P/E ratio of 19.30, while ACM has a forward P/E of 21.09. We also note that STRL has a PEG ratio of 1.29. 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. ACM currently has a PEG ratio of 1.57.
Another notable valuation metric for STRL is its P/B ratio of 4.95. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ACM has a P/B of 5.12.
Based on these metrics and many more, STRL holds a Value grade of B, while ACM has a Value grade of C.
STRL sticks out from ACM in both our Zacks Rank and Style Scores models, so value investors will likely feel that STRL is the better option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
