UTX or DHR: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Diversified Operations sector might want to consider either United Technologies (UTX) or Danaher (DHR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both United Technologies and Danaher have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
UTX currently has a forward P/E ratio of 16.67, while DHR has a forward P/E of 28.51. We also note that UTX has a PEG ratio of 1.89. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DHR currently has a PEG ratio of 2.46.
Another notable valuation metric for UTX is its P/B ratio of 2.69. 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, DHR has a P/B of 3.20.
These metrics, and several others, help UTX earn a Value grade of B, while DHR has been given a Value grade of D.
Both UTX and DHR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that UTX 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.