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AXS vs. BRK.B: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors with an interest in Insurance - Property and Casualty stocks have likely encountered both Axis Capital (AXS) and Berkshire Hathaway Inc. (BRK.B). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Axis Capital has a Zacks Rank of #2 (Buy), while Berkshire Hathaway Inc. has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AXS is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

AXS currently has a forward P/E ratio of 12.24, while BRK.B has a forward P/E of 21.01. We also note that AXS has a PEG ratio of 2.45. 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. BRK.B currently has a PEG ratio of 3.

Another notable valuation metric for AXS is its P/B ratio of 1.10. 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, BRK.B has a P/B of 1.39.

These are just a few of the metrics contributing to AXS's Value grade of B and BRK.B's Value grade of D.

AXS 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 AXS is likely the superior value option right now.

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