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Investors interested in stocks from the Manufacturing - Farm Equipment sector have probably already heard of Alamo Group (ALG) and Deere (DE). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Alamo Group and Deere have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
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.
ALG currently has a forward P/E ratio of 22, while DE has a forward P/E of 31.08. We also note that ALG has a PEG ratio of 2.20. 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. DE currently has a PEG ratio of 4.44.
Another notable valuation metric for ALG is its P/B ratio of 2.32. 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, DE has a P/B of 5.09.
Based on these metrics and many more, ALG holds a Value grade of B, while DE has a Value grade of C.
Both ALG and DE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ALG is the superior value option right now.
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Alamo Group, Inc. (ALG) : Free Stock Analysis Report
Deere Company (DE) : Free Stock Analysis Report
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