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RRX vs. ETN: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Regal Beloit (RRX - Free Report) or Eaton (ETN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies 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 means that RRX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

RRX currently has a forward P/E ratio of 15.03, while ETN has a forward P/E of 20.37. We also note that RRX has a PEG ratio of 1.50. 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. ETN currently has a PEG ratio of 1.85.

Another notable valuation metric for RRX is its P/B ratio of 1.67. 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 3.72.

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

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


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Eaton Corporation, PLC (ETN) - free report >>

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