Investors looking for stocks in the Engineering - R and D Services sector might want to consider either KBR Inc. (KBR - Free Report) or ROTORK PLC (RTOXY - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, KBR Inc. has a Zacks Rank of #2 (Buy), while ROTORK PLC has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KBR likely has seen a stronger improvement to its earnings outlook than RTOXY has recently. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
KBR currently has a forward P/E ratio of 13.64, while RTOXY has a forward P/E of 23.04. We also note that KBR has a PEG ratio of 1.51. 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. RTOXY currently has a PEG ratio of 1.84.
Another notable valuation metric for KBR is its P/B ratio of 1.78. 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, RTOXY has a P/B of 5.29.
Based on these metrics and many more, KBR holds a Value grade of B, while RTOXY has a Value grade of D.
KBR sticks out from RTOXY in both our Zacks Rank and Style Scores models, so value investors will likely feel that KBR is the better option right now.