Investors interested in Chemical - Diversified stocks are likely familiar with Air Products and Chemicals (APD - Free Report) and Praxair . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Air Products and Chemicals has a Zacks Rank of #2 (Buy), while Praxair 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 APD is likely seeing its earnings outlook improve to a greater extent. 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.
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.
APD currently has a forward P/E ratio of 21.16, while PX has a forward P/E of 22.83. We also note that APD has a PEG ratio of 1.30. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PX currently has a PEG ratio of 1.99.
Another notable valuation metric for APD is its P/B ratio of 3.19. 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, PX has a P/B of 6.43.
These metrics, and several others, help APD earn a Value grade of B, while PX has been given a Value grade of D.
APD is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that APD is likely the superior value option right now.