Investors with an interest in Building Products - Retail stocks have likely encountered both Tecnoglass (TGLS) and Fastenal (FAST). 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.
Tecnoglass and Fastenal are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that TGLS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
TGLS currently has a forward P/E ratio of 11.73, while FAST has a forward P/E of 21.16. We also note that TGLS has a PEG ratio of 0.59. 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. FAST currently has a PEG ratio of 1.51.
Another notable valuation metric for TGLS is its P/B ratio of 2.24. 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, FAST has a P/B of 6.79.
These metrics, and several others, help TGLS earn a Value grade of B, while FAST has been given a Value grade of D.
TGLS stands above FAST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TGLS is the superior value option right now.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.