Investors interested in stocks from the Paper and Related Products sector have probably already heard of Domtar (UFS - Free Report) and Neenah Paper (NP - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Domtar and Neenah Paper are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that UFS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
UFS currently has a forward P/E ratio of 12.31, while NP has a forward P/E of 19.20. We also note that UFS has a PEG ratio of 2.46. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NP currently has a PEG ratio of 3.84.
Another notable valuation metric for UFS is its P/B ratio of 1.16. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NP has a P/B of 3.47.
These metrics, and several others, help UFS earn a Value grade of A, while NP has been given a Value grade of C.
UFS sticks out from NP in both our Zacks Rank and Style Scores models, so value investors will likely feel that UFS is the better option right now.