Investors interested in Transportation - Equipment and Leasing stocks are likely familiar with Gatx (GATX - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Gatx has a Zacks Rank of #2 (Buy), while Westinghouse Air Brake Technologies has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that GATX likely has seen a stronger improvement to its earnings outlook than WAB has recently. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
GATX currently has a forward P/E ratio of 14.39, while WAB has a forward P/E of 16.76. We also note that GATX has a PEG ratio of 0.96. 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. WAB currently has a PEG ratio of 1.52.
Another notable valuation metric for GATX is its P/B ratio of 1.52. 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, WAB has a P/B of 2.36.
These metrics, and several others, help GATX earn a Value grade of B, while WAB has been given a Value grade of C.
GATX 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 GATX is likely the superior value option right now.