Investors interested in stocks from the Steel - Producers sector have probably already heard of Ternium S.A. (TX) and Steel Dynamics (STLD). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Ternium S.A. has a Zacks Rank of #1 (Strong Buy), while Steel Dynamics has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TX has an improving earnings outlook. But this is just one piece of the puzzle 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 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.
TX currently has a forward P/E ratio of 7.85, while STLD has a forward P/E of 13.99. We also note that TX has a PEG ratio of 0.16. 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. STLD currently has a PEG ratio of 0.45.
Another notable valuation metric for TX is its P/B ratio of 0.54. 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, STLD has a P/B of 3.67.
These are just a few of the metrics contributing to TX's Value grade of A and STLD's Value grade of C.
TX has seen stronger estimate revision activity and sports more attractive valuation metrics than STLD, so it seems like value investors will conclude that TX is the superior option right now.
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See Stocks Now >>Ternium S.A. (TX) : Free Stock Analysis Report
Steel Dynamics, Inc. (STLD) : 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.
