Investors interested in Chemical - Diversified stocks are likely familiar with Methanex (MEOH - Free Report) and PPG Industries (PPG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, Methanex is sporting a Zacks Rank of #1 (Strong Buy), while PPG Industries has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MEOH has an improving earnings outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
MEOH currently has a forward P/E ratio of 7.23, while PPG has a forward P/E of 18.67. We also note that MEOH has a PEG ratio of 0.48. 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. PPG currently has a PEG ratio of 2.24.
Another notable valuation metric for MEOH is its P/B ratio of 2.49. 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, PPG has a P/B of 5.12.
These metrics, and several others, help MEOH earn a Value grade of A, while PPG has been given a Value grade of D.
MEOH stands above PPG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MEOH is the superior value option right now.