Investors looking for stocks in the Financial - Investment Management sector might want to consider either AllianceBernstein (AB - Free Report) or HARGREAVES LNSD (HRGLY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
AllianceBernstein and HARGREAVES LNSD are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AB has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
AB currently has a forward P/E ratio of 11.33, while HRGLY has a forward P/E of 37.34. We also note that AB has a PEG ratio of 1.60. 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. HRGLY currently has a PEG ratio of 2.81.
Another notable valuation metric for AB is its P/B ratio of 1.88. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, HRGLY has a P/B of 30.25.
These are just a few of the metrics contributing to AB's Value grade of A and HRGLY's Value grade of F.
AB has seen stronger estimate revision activity and sports more attractive valuation metrics than HRGLY, so it seems like value investors will conclude that AB is the superior option right now.