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ACA vs. AWI: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of Arcosa (ACA - Free Report) and Armstrong World Industries (AWI - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Arcosa and Armstrong World Industries are sporting Zacks Ranks of #2 (Buy) and #5 (Strong 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 ACA has an improving earnings 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.

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.

ACA currently has a forward P/E ratio of 18.64, while AWI has a forward P/E of 19.44. We also note that ACA has a PEG ratio of 5.48. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AWI currently has a PEG ratio of 9.77.

Another notable valuation metric for ACA is its P/B ratio of 1.22. 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, AWI has a P/B of 8.27.

These are just a few of the metrics contributing to ACA's Value grade of B and AWI's Value grade of D.

ACA stands above AWI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ACA is the superior value option right now.


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Armstrong World Industries, Inc. (AWI) - free report >>

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