Investors looking for stocks in the Paper and Related Products sector might want to consider either Suzano S.A. Sponsored ADR (SUZ) or International Paper (IP). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 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.
Currently, Suzano S.A. Sponsored ADR has a Zacks Rank of #2 (Buy), while International Paper has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SUZ likely has seen a stronger improvement to its earnings outlook than IP has recently. But this is just one factor that value investors are interested in.
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 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.
SUZ currently has a forward P/E ratio of 4.41, while IP has a forward P/E of 18.45. We also note that SUZ has a PEG ratio of 0.08. 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. IP currently has a PEG ratio of 0.35.
Another notable valuation metric for SUZ is its P/B ratio of 2.06. 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, IP has a P/B of 2.28.
These are just a few of the metrics contributing to SUZ's Value grade of A and IP's Value grade of C.
SUZ 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 SUZ is likely the superior value option right now.
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International Paper Company (IP) : Free Stock Analysis Report
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.
