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NPO vs. XYL: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of EnPro Industries (NPO - Free Report) and Xylem (XYL - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, EnPro Industries is sporting a Zacks Rank of #2 (Buy), while Xylem has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NPO is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

NPO currently has a forward P/E ratio of 10.60, while XYL has a forward P/E of 19.54. We also note that NPO has a PEG ratio of 0.55. 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. XYL currently has a PEG ratio of 1.63.

Another notable valuation metric for NPO is its P/B ratio of 0.73. 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, XYL has a P/B of 3.63.

Based on these metrics and many more, NPO holds a Value grade of B, while XYL has a Value grade of D.

NPO 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 NPO is likely the superior value option right now.


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