Investors interested in stocks from the Engineering - R and D Services sector have probably already heard of Quanta Services (PWR - Free Report) and ROTORK PLC (RTOXY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Quanta Services has a Zacks Rank of #1 (Strong Buy), while ROTORK PLC has a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PWR has an improving earnings outlook. But this is only part of the picture 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 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.
PWR currently has a forward P/E ratio of 12.99, while RTOXY has a forward P/E of 26.25. We also note that PWR has a PEG ratio of 0.90. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. RTOXY currently has a PEG ratio of 2.10.
Another notable valuation metric for PWR is its P/B ratio of 1.53. 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, RTOXY has a P/B of 5.68.
Based on these metrics and many more, PWR holds a Value grade of A, while RTOXY has a Value grade of D.
PWR has seen stronger estimate revision activity and sports more attractive valuation metrics than RTOXY, so it seems like value investors will conclude that PWR is the superior option right now.