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Investors with an interest in Manufacturing - General Industrial stocks have likely encountered both Barnes Group (B) and RBC Bearings (ROLL). 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 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, Barnes Group is sporting a Zacks Rank of #2 (Buy), while RBC Bearings has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that B likely has seen a stronger improvement to its earnings outlook than ROLL has recently. But this is just one piece of the puzzle for value investors.
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.
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.
B currently has a forward P/E ratio of 19.52, while ROLL has a forward P/E of 35.75. We also note that B has a PEG ratio of 1.95. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ROLL currently has a PEG ratio of 6.09.
Another notable valuation metric for B is its P/B ratio of 2.77. 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, ROLL has a P/B of 4.22.
These are just a few of the metrics contributing to B's Value grade of B and ROLL's Value grade of F.
B stands above ROLL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that B is the superior value option right now.