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

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·2 min read
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Investors looking for stocks in the Chemical - Diversified sector might want to consider either Dow Inc. (DOW) or FMC (FMC). 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 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.

Dow Inc. has a Zacks Rank of #1 (Strong Buy), while FMC has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DOW has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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.

DOW currently has a forward P/E ratio of 11.26, while FMC has a forward P/E of 16.11. We also note that DOW has a PEG ratio of 0.41. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FMC currently has a PEG ratio of 1.50.

Another notable valuation metric for DOW is its P/B ratio of 3.47. 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, FMC has a P/B of 4.89.

These metrics, and several others, help DOW earn a Value grade of B, while FMC has been given a Value grade of C.

DOW has seen stronger estimate revision activity and sports more attractive valuation metrics than FMC, so it seems like value investors will conclude that DOW is the superior option right now.


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