Back to top

Image: Bigstock

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

Read MoreHide Full Article

Investors interested in Diversified Operations stocks are likely familiar with Federal Signal (FSS - Free Report) and 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 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.

Right now, Federal Signal is sporting a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #3 (Hold). 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

FSS currently has a forward P/E ratio of 20.65, while DHR has a forward P/E of 31.79. We also note that FSS has a PEG ratio of 1.38. 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 1.77.

Another notable valuation metric for FSS is its P/B ratio of 3.18. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, DHR has a P/B of 5.45.

Based on these metrics and many more, FSS holds a Value grade of B, while DHR has a Value grade of C.

FSS 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 FSS is likely the superior value option right now.

In-Depth Zacks Research for the Tickers Above

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

Federal Signal Corporation (FSS) - free report >>

Danaher Corporation (DHR) - free report >>

Published in