Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of Applied Industrial Technologies (AIT - Free Report) and Flowserve (FLS - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Applied Industrial Technologies and Flowserve are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
AIT currently has a forward P/E ratio of 14.05, while FLS has a forward P/E of 27.04. We also note that AIT has a PEG ratio of 1.17. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FLS currently has a PEG ratio of 1.57.
Another notable valuation metric for AIT is its P/B ratio of 2.92. 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, FLS has a P/B of 3.66.
Based on these metrics and many more, AIT holds a Value grade of B, while FLS has a Value grade of C.
Both AIT and FLS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AIT is the superior value option right now.