Investors with an interest in Chemical - Specialty stocks have likely encountered both Celanese (CE - Free Report) and Versum Materials (VSM - 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.
Celanese and Versum Materials are sporting Zacks Ranks of #1 (Strong 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 CE has an improving earnings outlook. 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 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.
CE currently has a forward P/E ratio of 10.15, while VSM has a forward P/E of 13.39. We also note that CE has a PEG ratio of 1.02. 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. VSM currently has a PEG ratio of 1.03.
Another notable valuation metric for CE is its P/B ratio of 3.89. 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, VSM has a P/B of 23.55.
Based on these metrics and many more, CE holds a Value grade of B, while VSM has a Value grade of C.
CE has seen stronger estimate revision activity and sports more attractive valuation metrics than VSM, so it seems like value investors will conclude that CE is the superior option right now.