Investors with an interest in Diversified Operations stocks have likely encountered both Orkla Asa (ORKLY - Free Report) and United Technologies (UTX - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Orkla Asa has a Zacks Rank of #2 (Buy), while United Technologies has a Zacks Rank of #3 (Hold). This means that ORKLY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
ORKLY currently has a forward P/E ratio of 2.37, while UTX has a forward P/E of 18.26. We also note that ORKLY has a PEG ratio of 0.70. 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. UTX currently has a PEG ratio of 2.08.
Another notable valuation metric for ORKLY is its P/B ratio of 2.37. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, UTX has a P/B of 2.99.
These are just a few of the metrics contributing to ORKLY's Value grade of B and UTX's Value grade of C.
ORKLY stands above UTX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ORKLY is the superior value option right now.