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BRRAY or ITT: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Diversified Operations sector might want to consider either Barloworld Ltd. (BRRAY - Free Report) or ITT (ITT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Right now, Barloworld Ltd. is sporting a Zacks Rank of #2 (Buy), while ITT has a Zacks Rank of #3 (Hold). This means that BRRAY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

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.

BRRAY currently has a forward P/E ratio of 10.90, while ITT has a forward P/E of 25.68. We also note that BRRAY has a PEG ratio of 0.37. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ITT currently has a PEG ratio of 1.66.

Another notable valuation metric for BRRAY is its P/B ratio of 1.27. 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, ITT has a P/B of 4.16.

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

BRRAY 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 BRRAY is likely the superior value option right now.


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