Investors with an interest in Pollution Control stocks have likely encountered both CECO Environmental (CECE - Free Report) and Sharps Compliance (SMED - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, CECO Environmental is sporting a Zacks Rank of #2 (Buy), while Sharps Compliance has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CECE likely has seen a stronger improvement to its earnings outlook than SMED has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
CECE currently has a forward P/E ratio of 16.59, while SMED has a forward P/E of 65.40. We also note that CECE has a PEG ratio of 1.11. 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. SMED currently has a PEG ratio of 3.49.
Another notable valuation metric for CECE is its P/B ratio of 1.44. 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, SMED has a P/B of 2.05.
Based on these metrics and many more, CECE holds a Value grade of B, while SMED has a Value grade of D.
CECE stands above SMED thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CECE is the superior value option right now.