Investors looking for stocks in the Solar sector might want to consider either Canadian Solar (CSIQ) or Sunrun (RUN). 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.
Right now, Canadian Solar is sporting a Zacks Rank of #2 (Buy), while Sunrun has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CSIQ is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CSIQ currently has a forward P/E ratio of 7.19, while RUN has a forward P/E of 10.88. We also note that CSIQ has a PEG ratio of 0.22. 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. RUN currently has a PEG ratio of 0.62.
Another notable valuation metric for CSIQ is its P/B ratio of 0.83. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, RUN has a P/B of 1.02.
Based on these metrics and many more, CSIQ holds a Value grade of A, while RUN has a Value grade of C.
CSIQ stands above RUN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CSIQ is the superior value option right now.
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