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URI vs. IBP: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both United Rentals (URI - Free Report) and Installed Building Products (IBP - Free Report) . 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, both United Rentals and Installed Building Products are holding a Zacks Rank of # 1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.

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.

URI currently has a forward P/E ratio of 10.96, while IBP has a forward P/E of 22.42. We also note that URI has a PEG ratio of 0.59. 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. IBP currently has a PEG ratio of 0.75.

Another notable valuation metric for URI is its P/B ratio of 4.64. 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, IBP has a P/B of 10.45.

These are just a few of the metrics contributing to URI's Value grade of A and IBP's Value grade of C.

Both URI and IBP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that URI is the superior value option right now.


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