Investors looking for stocks in the Financial - Investment Management sector might want to consider either Legg Mason (LM - Free Report) or Apollo Global Management, LLC (APO - 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Legg Mason has a Zacks Rank of #2 (Buy), while Apollo Global Management, LLC has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LM is likely seeing its earnings outlook improve to a greater extent. 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.
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.
LM currently has a forward P/E ratio of 10.59, while APO has a forward P/E of 18.69. We also note that LM has a PEG ratio of 0.92. 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. APO currently has a PEG ratio of 1.33.
Another notable valuation metric for LM is its P/B ratio of 0.89. 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, APO has a P/B of 4.41.
These metrics, and several others, help LM earn a Value grade of B, while APO has been given a Value grade of D.
LM stands above APO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LM is the superior value option right now.