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AER vs. WAB: Which Stock Should Value Investors Buy Now?

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Investors interested in Transportation - Equipment and Leasing stocks are likely familiar with AerCap (AER - Free Report) and Westinghouse Air Brake Technologies (WAB - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, both AerCap and Westinghouse Air Brake Technologies are sporting a Zacks Rank of #2 (Buy). 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

AER currently has a forward P/E ratio of 7.56, while WAB has a forward P/E of 26.32. We also note that AER has a PEG ratio of 0.57. 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. WAB currently has a PEG ratio of 1.93.

Another notable valuation metric for AER 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, WAB has a P/B of 4.3.

Based on these metrics and many more, AER holds a Value grade of A, while WAB has a Value grade of D.

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

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