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ATCO vs. LM: Which Stock Is the Better Value Option?

Zacks Equity Research
·2-min read

Investors looking for stocks in the Financial - Investment Management sector might want to consider either Seaspan (ATCO) or Legg Mason (LM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Seaspan and Legg Mason are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that ATCO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

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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.

ATCO currently has a forward P/E ratio of 7.38, while LM has a forward P/E of 13.25. We also note that ATCO has a PEG ratio of 0.63. 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. LM currently has a PEG ratio of 1.16.

Another notable valuation metric for ATCO is its P/B ratio of 0.48. 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, LM has a P/B of 1.11.

These metrics, and several others, help ATCO earn a Value grade of B, while LM has been given a Value grade of C.

ATCO stands above LM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ATCO is the superior value option right now.


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Seaspan Corporation (ATCO) : Free Stock Analysis Report
 
Legg Mason, Inc. (LM) : Free Stock Analysis Report
 
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Zacks Investment Research