Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either PGT (PGTI - Free Report) or Armstrong World Industries (AWI - 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.
PGT has a Zacks Rank of #2 (Buy), while Armstrong World Industries has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PGTI has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
PGTI currently has a forward P/E ratio of 13.97, while AWI has a forward P/E of 16.24. We also note that PGTI has a PEG ratio of 0.70. 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. AWI currently has a PEG ratio of 0.93.
Another notable valuation metric for PGTI is its P/B ratio of 2.53. 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, AWI has a P/B of 9.10.
These metrics, and several others, help PGTI earn a Value grade of B, while AWI has been given a Value grade of C.
PGTI has seen stronger estimate revision activity and sports more attractive valuation metrics than AWI, so it seems like value investors will conclude that PGTI is the superior option right now.