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JHX vs. AWI: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors interested in Building Products - Miscellaneous stocks are likely familiar with 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.

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.

James Hardie has a Zacks Rank of #1 (Strong Buy), while Armstrong World Industries has a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that JHX likely has seen a stronger improvement to its earnings outlook than AWI has recently. But this is just one piece of the puzzle for value investors.

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.

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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.

JHX currently has a forward P/E ratio of 12.32, while AWI has a forward P/E of 15.72. We also note that JHX has a PEG ratio of 1.23. 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 1.31.

Another notable valuation metric for JHX is its P/B ratio of 6.84. 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 7.12.

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

JHX sticks out from AWI in both our Zacks Rank and Style Scores models, so value investors will likely feel that JHX is the better 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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Zacks Investment Research