ECHO vs. ZTO: Which Stock Should Value Investors Buy Now?
Investors interested in Transportation - Services stocks are likely familiar with Echo Global Logistics (ECHO) and ZTO Express Cayman Inc. (ZTO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Echo Global Logistics has a Zacks Rank of #2 (Buy), while ZTO Express Cayman Inc. has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ECHO is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
ECHO currently has a forward P/E ratio of 18.26, while ZTO has a forward P/E of 34.30. We also note that ECHO has a PEG ratio of 1.04. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZTO currently has a PEG ratio of 2.76.
Another notable valuation metric for ECHO is its P/B ratio of 2.30. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ZTO has a P/B of 2.38.
These metrics, and several others, help ECHO earn a Value grade of B, while ZTO has been given a Value grade of D.
ECHO 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 ECHO is likely the superior value option right now.
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Echo Global Logistics, Inc. (ECHO) : Free Stock Analysis Report
ZTO Express Cayman Inc. (ZTO) : Free Stock Analysis Report
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