Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either United Rentals (URI - Free Report) or Armstrong World Industries (AWI - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Right now, both United Rentals and Armstrong World Industries are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have 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.
URI currently has a forward P/E ratio of 6.48, while AWI has a forward P/E of 19.10. We also note that URI has a PEG ratio of 0.36. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AWI currently has a PEG ratio of 1.17.
Another notable valuation metric for URI is its P/B ratio of 2.93. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AWI has a P/B of 16.17.
These metrics, and several others, help URI earn a Value grade of A, while AWI has been given a Value grade of C.
Both URI and AWI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that URI is the superior value option right now.