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A. O. Smith Corporation (AOS) - free report >>
Global X U.S. Cash Flow Kings 100 ETF (FLOW) - free report >>
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A. O. Smith Corporation (AOS) - free report >>
Global X U.S. Cash Flow Kings 100 ETF (FLOW) - free report >>
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FLOW vs. AOS: Which Stock Is the Better Value Option?
Investors interested in stocks from the Manufacturing - Electronics sector have probably already heard of SPX Flow (FLOW - Free Report) and A.O. Smith (AOS - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, SPX Flow is sporting a Zacks Rank of #2 (Buy), while A.O. Smith has a Zacks Rank of #3 (Hold). This means that FLOW's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
FLOW currently has a forward P/E ratio of 19.62, while AOS has a forward P/E of 22.61. We also note that FLOW has a PEG ratio of 0.51. 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. AOS currently has a PEG ratio of 1.88.
Another notable valuation metric for FLOW is its P/B ratio of 2.13. 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, AOS has a P/B of 5.84.
Based on these metrics and many more, FLOW holds a Value grade of A, while AOS has a Value grade of C.
FLOW has seen stronger estimate revision activity and sports more attractive valuation metrics than AOS, so it seems like value investors will conclude that FLOW is the superior option right now.