Investors interested in stocks from the Chemical - Diversified sector have probably already heard of Koppers (KOP - Free Report) and Praxair (PX - 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 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.
Currently, both Koppers and Praxair are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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 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.
KOP currently has a forward P/E ratio of 7.59, while PX has a forward P/E of 23.75. We also note that KOP has a PEG ratio of 0.42. 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. PX currently has a PEG ratio of 1.91.
Another notable valuation metric for KOP is its P/B ratio of 6.44. 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, PX has a P/B of 7.08.
These are just a few of the metrics contributing to KOP's Value grade of A and PX's Value grade of C.
Both KOP and PX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KOP is the superior value option right now.