Investors interested in Financial - Investment Management stocks are likely familiar with Federated Investors and Eaton Vance (EV - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.
Right now, both Federated Investors and Eaton Vance are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FII currently has a forward P/E ratio of 12.96, while EV has a forward P/E of 13.48. We also note that FII has a PEG ratio of 1.58. 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. EV currently has a PEG ratio of 2.46.
Another notable valuation metric for FII is its P/B ratio of 3.54. 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, EV has a P/B of 4.81.
Based on these metrics and many more, FII holds a Value grade of B, while EV has a Value grade of C.
Both FII and EV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FII is the superior value option right now.