Investors with an interest in Transportation - Airline stocks have likely encountered both Alaska Air Group (ALK - Free Report) and BBA AVIATION (BBAVY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Alaska Air Group has a Zacks Rank of #2 (Buy), while BBA AVIATION has a Zacks Rank of #3 (Hold) right now. This means that ALK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
ALK currently has a forward P/E ratio of 10.37, while BBAVY has a forward P/E of 18.16. We also note that ALK has a PEG ratio of 0.48. 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. BBAVY currently has a PEG ratio of 2.02.
Another notable valuation metric for ALK is its P/B ratio of 1.91. 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, BBAVY has a P/B of 2.04.
These metrics, and several others, help ALK earn a Value grade of A, while BBAVY has been given a Value grade of C.
ALK sticks out from BBAVY in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALK is the better option right now.