Investors with an interest in Transportation - Services stocks have likely encountered both Echo Global Logistics (ECHO - Free Report) and ZTO Express Cayman Inc. (ZTO - 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.
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.
Echo Global Logistics and ZTO Express Cayman Inc. are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ECHO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ECHO currently has a forward P/E ratio of 29.92, while ZTO has a forward P/E of 33.61. We also note that ECHO has a PEG ratio of 1.71. 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. ZTO currently has a PEG ratio of 2.17.
Another notable valuation metric for ECHO is its P/B ratio of 1.91. 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, ZTO has a P/B of 3.49.
These metrics, and several others, help ECHO earn a Value grade of A, while ZTO has been given a Value grade of C.
ECHO has seen stronger estimate revision activity and sports more attractive valuation metrics than ZTO, so it seems like value investors will conclude that ECHO is the superior option right now.