Back to top

Image: Bigstock

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

Read MoreHide Full Article

Investors interested in stocks from the Manufacturing - Electronics sector have probably already heard of Regal Beloit (RRX - Free Report) and 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Regal Beloit has 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. But this is just one factor that value investors are interested in.

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.

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.

RRX currently has a forward P/E ratio of 11.89, while ETN has a forward P/E of 18.74. We also note that RRX has a PEG ratio of 1.19. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ETN currently has a PEG ratio of 1.70.

Another notable valuation metric for RRX is its P/B ratio of 1.32. 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, ETN has a P/B of 3.37.

These are just a few of the metrics contributing to RRX's Value grade of B and ETN's 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.


In-Depth Zacks Research for the Tickers Above


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


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

Regal Rexnord Corporation (RRX) - free report >>

Published in