Investors with an interest in Industrial Services stocks have likely encountered both Siemens AG (SIEGY) and W.W. Grainger (GWW). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Siemens AG has a Zacks Rank of #1 (Strong Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SIEGY 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 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.
SIEGY currently has a forward P/E ratio of 15.79, while GWW has a forward P/E of 20.12. We also note that SIEGY has a PEG ratio of 0.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GWW currently has a PEG ratio of 1.55.
Another notable valuation metric for SIEGY is its P/B ratio of 2.59. 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, GWW has a P/B of 12.38.
Based on these metrics and many more, SIEGY holds a Value grade of B, while GWW has a Value grade of C.
SIEGY 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 SIEGY is likely the superior value option right now.
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