Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of United Rentals (URI - Free Report) and Armstrong World Industries (AWI - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Both United Rentals and Armstrong World Industries have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
URI currently has a forward P/E ratio of 6.66, while AWI has a forward P/E of 21.52. We also note that URI has a PEG ratio of 0.38. 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. AWI currently has a PEG ratio of 1.13.
Another notable valuation metric for URI is its P/B ratio of 3.05. 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, AWI has a P/B of 17.14.
Based on these metrics and many more, URI holds a Value grade of A, while AWI has 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.