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EMR vs. AOS: Which Stock Is the Better Value Option?

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·2 min read
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  • EMR
  • AOS

Investors interested in Manufacturing - Electronics stocks are likely familiar with Emerson Electric (EMR) and A.O. Smith (AOS). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, both Emerson Electric and A.O. Smith are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.

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 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.

EMR currently has a forward P/E ratio of 18.84, while AOS has a forward P/E of 27.73. We also note that EMR has a PEG ratio of 2.17. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AOS currently has a PEG ratio of 3.08.

Another notable valuation metric for EMR is its P/B ratio of 5.47. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AOS has a P/B of 6.79.

These are just a few of the metrics contributing to EMR's Value grade of B and AOS's Value grade of C.

Both EMR and AOS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EMR is the superior value option right now.


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Emerson Electric Co. (EMR) : Free Stock Analysis Report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
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Zacks Investment Research