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 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 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 #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CECE is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
CECE currently has a forward P/E ratio of 8.19, while TTEK has a forward P/E of 22.24. 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 1.48.
Another notable valuation metric for CECE is its P/B ratio of 0.85. 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, TTEK has a P/B of 3.98.
These are just a few of the metrics contributing to CECE's Value grade of A and TTEK's Value grade of F.
CECE has seen stronger estimate revision activity and sports more attractive valuation metrics than TTEK, so it seems like value investors will conclude that CECE is the superior option right now.