Investors interested in stocks from the Pollution Control sector have probably already heard of CECO Environmental (CECE) and Tetra Tech (TTEK). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, CECO Environmental is sporting a Zacks Rank of #2 (Buy), while Tetra Tech has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CECE has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
CECE currently has a forward P/E ratio of 8.24, while TTEK has a forward P/E of 20.15. We also note that CECE has a PEG ratio of 0.55. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TTEK currently has a PEG ratio of 1.34.
Another notable valuation metric for CECE is its P/B ratio of 0.85. 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, TTEK has a P/B of 3.76.
These metrics, and several others, help CECE earn a Value grade of A, while TTEK has been given a Value grade of D.
CECE sticks out from TTEK in both our Zacks Rank and Style Scores models, so value investors will likely feel that CECE is the better option right now.