Investors interested in Building Products - Miscellaneous stocks are likely familiar with United Rentals (URI) and Advanced Drainage Systems (WMS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, United Rentals is sporting a Zacks Rank of #2 (Buy), while Advanced Drainage Systems 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 11.53, while WMS has a forward P/E of 22.48. We also note that URI has a PEG ratio of 0.71. 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. WMS currently has a PEG ratio of 1.32.
Another notable valuation metric for URI is its P/B ratio of 4.41. 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, WMS has a P/B of 11.37.
Based on these metrics and many more, URI holds a Value grade of A, while WMS 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.
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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.
