Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both James Hardie (JHX) and Armstrong World Industries (AWI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, James Hardie has a Zacks Rank of #2 (Buy), while Armstrong World Industries has a Zacks Rank of #4 (Sell). This means that JHX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
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.
JHX currently has a forward P/E ratio of 11.02, while AWI has a forward P/E of 15.43. We also note that JHX has a PEG ratio of 1.10. 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. AWI currently has a PEG ratio of 1.34.
Another notable valuation metric for JHX is its P/B ratio of 6.01. 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, AWI has a P/B of 6.49.
These are just a few of the metrics contributing to JHX's Value grade of A and AWI's Value grade of C.
JHX 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 JHX is likely the superior value option right now.
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James Hardie Industries PLC. (JHX) : Free Stock Analysis Report
Armstrong World Industries, Inc. (AWI) : Free Stock Analysis Report
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