Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Federated Investors (FII) and T. Rowe Price (TROW). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Federated Investors and T. Rowe Price are both sporting a Zacks Rank of # 2 (Buy) right now. 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. However, value investors will care about much more than just this.
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.
FII currently has a forward P/E ratio of 12.91, while TROW has a forward P/E of 15.37. We also note that FII has a PEG ratio of 1.74. 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. TROW currently has a PEG ratio of 1.77.
Another notable valuation metric for FII is its P/B ratio of 4.11. 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, TROW has a P/B of 4.17.
These metrics, and several others, help FII earn a Value grade of B, while TROW has been given a Value grade of D.
Both FII and TROW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FII is the superior value option right now.
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Federated Investors, Inc. (FII) : Free Stock Analysis Report
T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report
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