Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either United Rentals (URI) or Armstrong World Industries (AWI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
United Rentals and Armstrong World Industries are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
URI currently has a forward P/E ratio of 18.29, while AWI has a forward P/E of 23.34. We also note that URI has a PEG ratio of 1.95. 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. AWI currently has a PEG ratio of 2.06.
Another notable valuation metric for URI is its P/B ratio of 5.9. 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, AWI has a P/B of 8.98.
These metrics, and several others, help URI earn a Value grade of B, while AWI has been given a Value grade of D.
URI 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 URI is likely the superior value option right now.
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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.
