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FSS vs. DHR: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Diversified Operations sector might want to consider either Federal Signal (FSS - Free Report) or Danaher (DHR - 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.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Federal Signal and Danaher are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that FSS likely has seen a stronger improvement to its earnings outlook than DHR has recently. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

FSS currently has a forward P/E ratio of 22.80, while DHR has a forward P/E of 29.44. We also note that FSS has a PEG ratio of 1.52. 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. DHR currently has a PEG ratio of 2.15.

Another notable valuation metric for FSS is its P/B ratio of 3.59. 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, DHR has a P/B of 4.89.

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

FSS sticks out from DHR in both our Zacks Rank and Style Scores models, so value investors will likely feel that FSS is the better option right now.


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