Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of EnPro Industries (NPO - Free Report) and Barnes Group (B - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 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.
EnPro Industries has a Zacks Rank of #1 (Strong Buy), while Barnes Group has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that NPO likely has seen a stronger improvement to its earnings outlook than B has recently. But this is only part of the picture for value investors.
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 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.
NPO currently has a forward P/E ratio of 17.79, while B has a forward P/E of 18.10. We also note that NPO has a PEG ratio of 1.19. 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. B currently has a PEG ratio of 2.59.
Another notable valuation metric for NPO is its P/B ratio of 1.54. 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, B has a P/B of 2.49.
These metrics, and several others, help NPO earn a Value grade of B, while B has been given a Value grade of C.
NPO has seen stronger estimate revision activity and sports more attractive valuation metrics than B, so it seems like value investors will conclude that NPO is the superior option right now.