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Investors with an interest in Manufacturing - Electronics stocks have likely encountered both ABB (ABB) and A.O. Smith (AOS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
ABB and A.O. Smith are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that ABB likely has seen a stronger improvement to its earnings outlook than AOS has recently. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ABB currently has a forward P/E ratio of 14.03, while AOS has a forward P/E of 22.23. We also note that ABB has a PEG ratio of 2.26. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AOS currently has a PEG ratio of 2.78.
Another notable valuation metric for ABB is its P/B ratio of 2.93. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AOS has a P/B of 4.29.
These metrics, and several others, help ABB earn a Value grade of A, while AOS has been given a Value grade of C.
ABB stands above AOS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ABB is the superior value option right now.
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ABB Ltd (ABB) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
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