Investors interested in stocks from the Manufacturing - Electronics sector have probably already heard of Vestas Wind Systems AS (VWDRY) and ABB (ABBNY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Vestas Wind Systems AS has a Zacks Rank of #2 (Buy), while ABB has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that VWDRY likely has seen a stronger improvement to its earnings outlook than ABBNY has recently. But this is just one piece of the puzzle for value investors.
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.
VWDRY currently has a forward P/E ratio of 22.88, while ABBNY has a forward P/E of 24.43. We also note that VWDRY has a PEG ratio of 0.56. 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. ABBNY currently has a PEG ratio of 1.95.
Another notable valuation metric for VWDRY is its P/B ratio of 6.98. 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, ABBNY has a P/B of 8.79.
These metrics, and several others, help VWDRY earn a Value grade of B, while ABBNY has been given a Value grade of D.
VWDRY has seen stronger estimate revision activity and sports more attractive valuation metrics than ABBNY, so it seems like value investors will conclude that VWDRY is the superior 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.
