Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both TopBuild (BLD - Free Report) and GCP Applied Technologies (GCP - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, TopBuild has a Zacks Rank of #1 (Strong Buy), while GCP Applied Technologies has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BLD has an improving earnings outlook. 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.
BLD currently has a forward P/E ratio of 15.40, while GCP has a forward P/E of 21.17. We also note that BLD has a PEG ratio of 0.55. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GCP currently has a PEG ratio of 1.18.
Another notable valuation metric for BLD is its P/B ratio of 2.47. 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, GCP has a P/B of 3.21.
Based on these metrics and many more, BLD holds a Value grade of B, while GCP has a Value grade of D.
BLD has seen stronger estimate revision activity and sports more attractive valuation metrics than GCP, so it seems like value investors will conclude that BLD is the superior option right now.