Investors looking for stocks in the Manufacturing - General Industrial sector might want to consider either Wolseley (FERGD - Free Report) or Xylem (XYL - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Wolseley is sporting a Zacks Rank of #2 (Buy), while Xylem has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FERGD is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
FERGD currently has a forward P/E ratio of 17.62, while XYL has a forward P/E of 23.96. We also note that FERGD has a PEG ratio of 1.06. 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. XYL currently has a PEG ratio of 1.33.
Another notable valuation metric for FERGD is its P/B ratio of 4.17. 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, XYL has a P/B of 4.88.
These are just a few of the metrics contributing to FERGD's Value grade of A and XYL's Value grade of D.
FERGD stands above XYL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FERGD is the superior value option right now.