Investors interested in stocks from the Industrial Services sector have probably already heard of MSC Industrial (MSM - Free Report) and W.W. Grainger (GWW - 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both MSC Industrial and W.W. Grainger have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
MSM currently has a forward P/E ratio of 14.85, while GWW has a forward P/E of 22.21. We also note that MSM has a PEG ratio of 1.09. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. GWW currently has a PEG ratio of 1.78.
Another notable valuation metric for MSM is its P/B ratio of 3.54. 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, GWW has a P/B of 9.76.
Based on these metrics and many more, MSM holds a Value grade of B, while GWW has a Value grade of C.
Both MSM and GWW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MSM is the superior value option right now.