Investors interested in stocks from the Transportation - Equipment and Leasing sector have probably already heard of Gatx (GATX) and Westinghouse Air Brake Technologies (WAB). 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.
Currently, Gatx has a Zacks Rank of #1 (Strong Buy), while Westinghouse Air Brake Technologies has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GATX has an improving earnings outlook. 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.
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.
GATX currently has a forward P/E ratio of 14.58, while WAB has a forward P/E of 17.05. We also note that GATX has a PEG ratio of 0.97. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WAB currently has a PEG ratio of 1.56.
Another notable valuation metric for GATX is its P/B ratio of 1.50. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WAB has a P/B of 1.53.
These are just a few of the metrics contributing to GATX's Value grade of B and WAB's Value grade of D.
GATX stands above WAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GATX is the superior value option right now.