Investors interested in Paper and Related Products stocks are likely familiar with Domtar (UFS) and Neenah Paper (NP). 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.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Domtar is sporting a Zacks Rank of #2 (Buy), while Neenah Paper has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UFS is likely seeing its earnings outlook improve to a greater extent. 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.
UFS currently has a forward P/E ratio of 7.75, while NP has a forward P/E of 16.90. We also note that UFS has a PEG ratio of 1.55. 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. NP currently has a PEG ratio of 3.38.
Another notable valuation metric for UFS is its P/B ratio of 0.88. 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, NP has a P/B of 2.57.
These metrics, and several others, help UFS earn a Value grade of A, while NP has been given a Value grade of D.
UFS sticks out from NP in both our Zacks Rank and Style Scores models, so value investors will likely feel that UFS is the better 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.