Investors interested in Diversified Operations stocks are likely familiar with Sumitomo Corp. (SSUMY) and ITT (ITT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Sumitomo Corp. is sporting a Zacks Rank of #1 (Strong Buy), while ITT has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SSUMY has an improving earnings outlook. However, value investors will care about much more than just this.
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.
SSUMY currently has a forward P/E ratio of 7.26, while ITT has a forward P/E of 16.81. We also note that SSUMY has a PEG ratio of 0.16. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ITT currently has a PEG ratio of 1.32.
Another notable valuation metric for SSUMY is its P/B ratio of 0.84. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ITT has a P/B of 2.93.
Based on these metrics and many more, SSUMY holds a Value grade of A, while ITT has a Value grade of C.
SSUMY 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 SSUMY is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report