Investors interested in stocks from the Financial - Investment Management sector have probably already heard of T. Rowe Price (TROW - Free Report) and HARGREAVES LNSD (HRGLY - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
T. Rowe Price has a Zacks Rank of #2 (Buy), while HARGREAVES LNSD has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TROW has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
TROW currently has a forward P/E ratio of 16.37, while HRGLY has a forward P/E of 34.96. We also note that TROW has a PEG ratio of 1.47. 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. HRGLY currently has a PEG ratio of 2.55.
Another notable valuation metric for TROW is its P/B ratio of 4.84. 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, HRGLY has a P/B of 28.88.
These metrics, and several others, help TROW earn a Value grade of B, while HRGLY has been given a Value grade of F.
TROW has seen stronger estimate revision activity and sports more attractive valuation metrics than HRGLY, so it seems like value investors will conclude that TROW is the superior option right now.