Investors interested in stocks from the Chemical - Diversified sector have probably already heard of Methanex (MEOH - Free Report) and Nissan Chemical Industries, Ltd. . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Methanex has a Zacks Rank of #1 (Strong Buy), while Nissan Chemical Industries, Ltd. has a Zacks Rank of #4 (Sell) right now. This means that MEOH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
MEOH currently has a forward P/E ratio of 10.36, while NNCHY has a forward P/E of 27.48. We also note that MEOH has a PEG ratio of 0.69. 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. NNCHY currently has a PEG ratio of 2.20.
Another notable valuation metric for MEOH is its P/B ratio of 3.65. 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, NNCHY has a P/B of 5.
These are just a few of the metrics contributing to MEOH's Value grade of A and NNCHY's Value grade of F.
MEOH is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that MEOH is likely the superior value option right now.