Investors looking for stocks in the Manufacturing - General Industrial sector might want to consider either Flowserve (FLS - Free Report) or Idex (IEX - 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.
Currently, Flowserve has a Zacks Rank of #2 (Buy), while Idex 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 FLS 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.
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.
FLS currently has a forward P/E ratio of 17.45, while IEX has a forward P/E of 22.47. We also note that FLS has a PEG ratio of 0.87. 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. IEX currently has a PEG ratio of 2.19.
Another notable valuation metric for FLS is its P/B ratio of 3.07. 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, IEX has a P/B of 4.82.
Based on these metrics and many more, FLS holds a Value grade of B, while IEX has a Value grade of F.
FLS has seen stronger estimate revision activity and sports more attractive valuation metrics than IEX, so it seems like value investors will conclude that FLS is the superior option right now.