Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Vestas Wind Systems AS (VWDRY) or Eaton (ETN). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Vestas Wind Systems AS and Eaton are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that VWDRY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
VWDRY currently has a forward P/E ratio of 22.38, while ETN has a forward P/E of 27.13. We also note that VWDRY has a PEG ratio of 0.67. 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. ETN currently has a PEG ratio of 2.52.
Another notable valuation metric for VWDRY is its P/B ratio of 4.72. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ETN has a P/B of 6.87.
These metrics, and several others, help VWDRY earn a Value grade of A, while ETN has been given a Value grade of C.
VWDRY stands above ETN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VWDRY is the superior value option right now.
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See Stocks Now >>Vestas Wind Systems AS (VWDRY) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
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.
