Investors looking for stocks in the Soap and Cleaning Materials sector might want to consider either Unilever NV (UN) or Clorox (CLX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Unilever NV has a Zacks Rank of #1 (Strong Buy), while Clorox has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UN has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
UN currently has a forward P/E ratio of 19.15, while CLX has a forward P/E of 23.48. We also note that UN has a PEG ratio of 3.12. 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. CLX currently has a PEG ratio of 3.71.
Another notable valuation metric for UN is its P/B ratio of 6.25. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CLX has a P/B of 27.98.
Based on these metrics and many more, UN holds a Value grade of B, while CLX has a Value grade of D.
UN 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 UN is likely 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.