Investors with an interest in Transportation - Equipment and Leasing stocks have likely encountered both Aircastle (AYR - Free Report) and Trinity Industries (TRN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Both Aircastle and Trinity Industries have a Zacks Rank of # 1 (Strong 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 factor that value investors are interested in.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
AYR currently has a forward P/E ratio of 8.68, while TRN has a forward P/E of 22.83. We also note that AYR has a PEG ratio of 0.87. 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. TRN currently has a PEG ratio of 2.28.
Another notable valuation metric for AYR is its P/B ratio of 0.82. 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, TRN has a P/B of 1.19.
Based on these metrics and many more, AYR holds a Value grade of A, while TRN has a Value grade of C.
Both AYR and TRN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AYR is the superior value option right now.