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RBC or ETN: Which Is the Better Value Stock Right Now?

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Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Regal Beloit (RBC - Free Report) and Eaton (ETN - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Regal Beloit is sporting a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RBC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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 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.

RBC currently has a forward P/E ratio of 20.04, while ETN has a forward P/E of 24.74. We also note that RBC has a PEG ratio of 2. 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. ETN currently has a PEG ratio of 2.25.

Another notable valuation metric for RBC is its P/B ratio of 2.26. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ETN has a P/B of 3.74.

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

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


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