Investors interested in Building Products - Miscellaneous stocks are likely familiar with United Rentals (URI) and Simpson Manufacturing (SSD). 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 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 Simpson Manufacturing 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 just one factor that value investors are interested in.
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 6.24, while SSD has a forward P/E of 17.49. We also note that URI has a PEG ratio of 0.35. 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. SSD currently has a PEG ratio of 3.50.
Another notable valuation metric for URI is its P/B ratio of 2.47. 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, SSD has a P/B of 2.71.
These metrics, and several others, help URI earn a Value grade of A, while SSD has been given a Value grade of C.
URI stands above SSD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that URI is the superior value option right now.