Investors interested in stocks from the Diversified Operations sector have probably already heard of Carlisle (CSL) and 3M (MMM). 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, Carlisle is sporting a Zacks Rank of #1 (Strong Buy), while 3M has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CSL has an improving earnings outlook. But this is only part of the picture 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.
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.
CSL currently has a forward P/E ratio of 16.71, while MMM has a forward P/E of 19.71. We also note that CSL has a PEG ratio of 1.11. 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. MMM currently has a PEG ratio of 1.94.
Another notable valuation metric for CSL is its P/B ratio of 2.84. 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, MMM has a P/B of 12.36.
These metrics, and several others, help CSL earn a Value grade of B, while MMM has been given a Value grade of C.
CSL 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 CSL is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report
3M Company (MMM) : Free Stock Analysis Report
To read this article on Zacks.com click here.