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DOW vs. ALB: Which Stock Is the Better Value Option?

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Investors with an interest in Chemical - Diversified stocks have likely encountered both Dow Inc. (DOW) and Albemarle (ALB). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Dow Inc. is sporting a Zacks Rank of #2 (Buy), while Albemarle has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DOW likely has seen a stronger improvement to its earnings outlook than ALB has recently. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

DOW currently has a forward P/E ratio of 7.42, while ALB has a forward P/E of 62.74. We also note that DOW has a PEG ratio of 0.27. 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. ALB currently has a PEG ratio of 3.15.

Another notable valuation metric for DOW is its P/B ratio of 2.86. 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, ALB has a P/B of 4.16.

Based on these metrics and many more, DOW holds a Value grade of A, while ALB has a Value grade of D.

DOW stands above ALB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DOW is the superior value option right now.


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