FERG vs. ITW: Which Stock Is the Better Value Option?
Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of Wolseley PLC (FERG) and Illinois Tool Works (ITW). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Wolseley PLC and Illinois Tool Works are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FERG has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
FERG currently has a forward P/E ratio of 20.12, while ITW has a forward P/E of 25.70. We also note that FERG has a PEG ratio of 2.16. 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. ITW currently has a PEG ratio of 2.19.
Another notable valuation metric for FERG is its P/B ratio of 7.56. 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, ITW has a P/B of 19.88.
These are just a few of the metrics contributing to FERG's Value grade of B and ITW's Value grade of C.
FERG 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 FERG is likely the superior value option right now.
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Wolseley PLC (FERG) : Free Stock Analysis Report
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
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