Back to top

Image: Bigstock

TTEK or DCI: Which Is the Better Value Stock Right Now?

Read MoreHide Full Article

Investors looking for stocks in the Pollution Control sector might want to consider either Tetra Tech (TTEK - Free Report) or Donaldson (DCI - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Tetra Tech and Donaldson are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that TTEK likely has seen a stronger improvement to its earnings outlook than DCI has recently. 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.

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.

TTEK currently has a forward P/E ratio of 18.22, while DCI has a forward P/E of 18.59. We also note that TTEK has a PEG ratio of 1.30. 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. DCI currently has a PEG ratio of 1.62.

Another notable valuation metric for TTEK is its P/B ratio of 3. 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, DCI has a P/B of 6.67.

These metrics, and several others, help TTEK earn a Value grade of B, while DCI has been given a Value grade of C.

TTEK is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TTEK is likely the superior value option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Tetra Tech, Inc. (TTEK) - free report >>

Donaldson Company, Inc. (DCI) - free report >>

Published in