Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Owens Corning (OC - Free Report) and GCP Applied Technologies (GCP - 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Owens Corning has a Zacks Rank of #2 (Buy), while GCP Applied Technologies has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that OC likely has seen a stronger improvement to its earnings outlook than GCP 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 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.
OC currently has a forward P/E ratio of 8.69, while GCP has a forward P/E of 25.08. We also note that OC has a PEG ratio of 0.65. 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. GCP currently has a PEG ratio of 1.39.
Another notable valuation metric for OC is its P/B ratio of 1.07. 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, GCP has a P/B of 3.51.
Based on these metrics and many more, OC holds a Value grade of A, while GCP has a Value grade of D.
OC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that OC is likely the superior value option right now.