Investors interested in Engineering - R and D Services stocks are likely familiar with Babcock International Group PLC (BCKIY - Free Report) and SPIRAX SARCO (SPXSF - 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Babcock International Group PLC and SPIRAX SARCO are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that BCKIY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BCKIY currently has a forward P/E ratio of 8.39, while SPXSF has a forward P/E of 35.48. We also note that BCKIY has a PEG ratio of 2.10. 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. SPXSF currently has a PEG ratio of 4.44.
Another notable valuation metric for BCKIY is its P/B ratio of 1.12. 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, SPXSF has a P/B of 8.64.
These are just a few of the metrics contributing to BCKIY's Value grade of A and SPXSF's Value grade of F.
BCKIY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BCKIY is likely the superior value option right now.