Investors interested in stocks from the Financial - Investment Management sector have probably already heard of T. Rowe Price (TROW) and BlackRock (BLK). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Right now, T. Rowe Price is sporting a Zacks Rank of #2 (Buy), while BlackRock has a Zacks Rank of #3 (Hold). This means that TROW's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
TROW currently has a forward P/E ratio of 12.48, while BLK has a forward P/E of 20.77. We also note that TROW has a PEG ratio of 1.63. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BLK currently has a PEG ratio of 1.90.
Another notable valuation metric for TROW is its P/B ratio of 2.52. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, BLK has a P/B of 3.19.
These metrics, and several others, help TROW earn a Value grade of B, while BLK has been given a Value grade of D.
TROW 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 TROW is likely the superior value option right now.
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