Investors interested in Building Products - Wood stocks are likely familiar with Universal Forest Products (UFPI - Free Report) and Louisiana-Pacific (LPX - 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.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Universal Forest Products has a Zacks Rank of #2 (Buy), while Louisiana-Pacific has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UFPI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
UFPI currently has a forward P/E ratio of 12.99, while LPX has a forward P/E of 16.19. We also note that UFPI has a PEG ratio of 2.60. 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. LPX currently has a PEG ratio of 3.24.
Another notable valuation metric for UFPI is its P/B ratio of 1.95. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LPX has a P/B of 2.35.
These metrics, and several others, help UFPI earn a Value grade of B, while LPX has been given a Value grade of C.
UFPI stands above LPX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UFPI is the superior value option right now.