Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of United Rentals (URI) and Masco (MAS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, United Rentals has a Zacks Rank of #2 (Buy), while Masco has a Zacks Rank of #3 (Hold). This means that URI'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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
URI currently has a forward P/E ratio of 18.17, while MAS has a forward P/E of 20.42. We also note that URI has a PEG ratio of 1.87. 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. MAS currently has a PEG ratio of 2.63.
Another notable valuation metric for URI is its P/B ratio of 6.44. 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, MAS has a P/B of 100.51.
These are just a few of the metrics contributing to URI's Value grade of B and MAS's Value grade of C.
URI stands above MAS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that URI is the superior value option right now.
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Masco Corporation (MAS) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
