Investors interested in stocks from the Security and Safety Services sector have probably already heard of Brady (BRC) and Allegion (ALLE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Brady and Allegion are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
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.
BRC currently has a forward P/E ratio of 13.82, while ALLE has a forward P/E of 15.82. We also note that BRC has a PEG ratio of 1.97. 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. ALLE currently has a PEG ratio of 2.60.
Another notable valuation metric for BRC is its P/B ratio of 2.37. 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, ALLE has a P/B of 8.82.
These are just a few of the metrics contributing to BRC's Value grade of B and ALLE's Value grade of C.
Both BRC and ALLE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BRC is the superior value option right now.
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