Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Arcosa (ACA - Free Report) or GCP Applied Technologies (GCP - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Arcosa has a Zacks Rank of #2 (Buy), while GCP Applied Technologies has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ACA has an improving earnings outlook. But this is just one factor that value investors are interested in.
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 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.
ACA currently has a forward P/E ratio of 16.14, while GCP has a forward P/E of 28.19. We also note that ACA has a PEG ratio of 1.32. 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. GCP currently has a PEG ratio of 1.57.
Another notable valuation metric for ACA is its P/B ratio of 1.01. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GCP has a P/B of 2.99.
These metrics, and several others, help ACA earn a Value grade of B, while GCP has been given a Value grade of D.
ACA stands above GCP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ACA is the superior value option right now.