CAT vs. HEES: Which Stock Is the Better Value Option?

Investors with an interest in Manufacturing - Construction and Mining stocks have likely encountered both Caterpillar (CAT) and H&E Equipment (HEES). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Caterpillar and H&E Equipment are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CAT has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CAT currently has a forward P/E ratio of 12.84, while HEES has a forward P/E of 18.55. We also note that CAT has a PEG ratio of 0.97. 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. HEES currently has a PEG ratio of 1.07.

Another notable valuation metric for CAT is its P/B ratio of 5.41. 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, HEES has a P/B of 6.39.

Based on these metrics and many more, CAT holds a Value grade of A, while HEES has a Value grade of C.

CAT has seen stronger estimate revision activity and sports more attractive valuation metrics than HEES, so it seems like value investors will conclude that CAT is the superior option right now.

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Caterpillar Inc. (CAT) : Free Stock Analysis Report
 
H&E Equipment Services, Inc. (HEES) : Free Stock Analysis Report
 
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