Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both United Rentals (URI) and Simpson Manufacturing (SSD). 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 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 has a Zacks Rank of #2 (Buy), while Simpson Manufacturing has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that URI is likely seeing its earnings outlook improve to a greater extent. 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.
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.
URI currently has a forward P/E ratio of 7.30, while SSD has a forward P/E of 18.94. We also note that URI has a PEG ratio of 0.41. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SSD currently has a PEG ratio of 3.79.
Another notable valuation metric for URI is its P/B ratio of 2.88. 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, SSD has a P/B of 2.93.
Based on these metrics and many more, URI holds a Value grade of A, while SSD has a Value grade of C.
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.