Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Vestas Wind Systems AS (VWDRY) or ABB (ABBNY). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Vestas Wind Systems AS has a Zacks Rank of #2 (Buy), while ABB 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 VWDRY 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 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.
VWDRY currently has a forward P/E ratio of 23.32, while ABBNY has a forward P/E of 25.47. We also note that VWDRY has a PEG ratio of 0.57. 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. ABBNY currently has a PEG ratio of 2.03.
Another notable valuation metric for VWDRY is its P/B ratio of 7.12. 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 9.17.
These metrics, and several others, help VWDRY earn a Value grade of B, while ABBNY has been given a Value grade of D.
VWDRY sticks out from ABBNY in both our Zacks Rank and Style Scores models, so value investors will likely feel that VWDRY is the better 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.
