Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Arcosa (ACA - Free Report) or GCP Applied Technologies (GCP - 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Arcosa has a Zacks Rank of #1 (Strong Buy), while GCP Applied Technologies 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 GCP has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ACA currently has a forward P/E ratio of 16.81, while GCP has a forward P/E of 24.74. We also note that ACA has a PEG ratio of 1.33. 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. GCP currently has a PEG ratio of 1.37.
Another notable valuation metric for ACA is its P/B ratio of 1.20. 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, GCP has a P/B of 3.24.
These metrics, and several others, help ACA earn a Value grade of B, while GCP has been given a Value grade of C.
ACA stands above GCP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ACA is the superior value option right now.