URI vs. ROAD: Which Stock Is the Better Value Option?

Investors interested in Building Products - Miscellaneous stocks are likely familiar with United Rentals (URI) and Construction Partners (ROAD). 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, United Rentals is sporting a Zacks Rank of #2 (Buy), while Construction Partners 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 URI has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

URI currently has a forward P/E ratio of 10.67, while ROAD has a forward P/E of 37.98. We also note that URI has a PEG ratio of 0.59. 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. ROAD currently has a PEG ratio of 1.03.

Another notable valuation metric for URI is its P/B ratio of 3.79. 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, ROAD has a P/B of 3.82.

Based on these metrics and many more, URI holds a Value grade of A, while ROAD has a Value grade of C.

URI stands above ROAD 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.