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EMR vs. AOS: Which Stock Should Value Investors Buy Now?

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Investors interested in Manufacturing - Electronics stocks are likely familiar with Emerson Electric (EMR - Free Report) and A.O. Smith (AOS - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Both Emerson Electric and A.O. Smith have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

EMR currently has a forward P/E ratio of 18.87, while AOS has a forward P/E of 28.70. We also note that EMR has a PEG ratio of 2.17. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AOS currently has a PEG ratio of 3.19.

Another notable valuation metric for EMR is its P/B ratio of 5.59. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, AOS has a P/B of 7.02.

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

Both EMR and AOS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EMR is the superior value option right now.


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Emerson Electric Co. (EMR) - free report >>

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