Investors with an interest in Metal Products - Procurement and Fabrication stocks have likely encountered both Timken (TKR) and TriMas (TRS). 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.
Timken and TriMas are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
TKR currently has a forward P/E ratio of 9.19, while TRS has a forward P/E of 16.12. We also note that TKR has a PEG ratio of 0.62. 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. TRS currently has a PEG ratio of 3.22.
Another notable valuation metric for TKR is its P/B ratio of 1.81. 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, TRS has a P/B of 2.10.
These metrics, and several others, help TKR earn a Value grade of A, while TRS has been given a Value grade of C.
Both TKR and TRS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TKR 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.