Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Arcosa (ACA) and Continental Building Products . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Arcosa has a Zacks Rank of #2 (Buy), while Continental Building Products has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ACA likely has seen a stronger improvement to its earnings outlook than CBPX has recently. 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.
ACA currently has a forward P/E ratio of 19.54, while CBPX has a forward P/E of 21.84. We also note that ACA has a PEG ratio of 1.55. 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. CBPX currently has a PEG ratio of 4.37.
Another notable valuation metric for ACA is its P/B ratio of 1.22. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CBPX has a P/B of 3.61.
These are just a few of the metrics contributing to ACA's Value grade of A and CBPX's Value grade of C.
ACA has seen stronger estimate revision activity and sports more attractive valuation metrics than CBPX, so it seems like value investors will conclude that ACA is the superior option right now.