FERG vs. ITW: Which Stock Is the Better Value Option?
Investors with an interest in Manufacturing - General Industrial stocks have likely encountered both Ferguson 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ferguson plc and Illinois Tool Works are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that FERG likely has seen a stronger improvement to its earnings outlook than ITW has recently. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
FERG currently has a forward P/E ratio of 17.38, while ITW has a forward P/E of 23.73. We also note that FERG has a PEG ratio of 2.99. 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. ITW currently has a PEG ratio of 4.12.
Another notable valuation metric for FERG is its P/B ratio of 7.38. 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, ITW has a P/B of 22.68.
Based on these metrics and many more, FERG holds a Value grade of B, while ITW has a Value grade of D.
FERG stands above ITW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FERG is the superior value option right now.
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Ferguson plc (FERG) : Free Stock Analysis Report
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
