Investors interested in stocks from the Chemical - Specialty sector have probably already heard of Israel Chemicals (ICL - Free Report) and Ingevity Corporation (NGVT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Israel Chemicals and Ingevity Corporation are both sporting a Zacks Rank of # 1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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 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.
ICL currently has a forward P/E ratio of 14.87, while NGVT has a forward P/E of 19.85. We also note that ICL has a PEG ratio of 1.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NGVT currently has a PEG ratio of 1.65.
Another notable valuation metric for ICL is its P/B ratio of 1.93. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NGVT has a P/B of 12.09.
These are just a few of the metrics contributing to ICL's Value grade of B and NGVT's Value grade of D.
Both ICL and NGVT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ICL is the superior value option right now.