Investors with an interest in Manufacturing - Electronics stocks have likely encountered both SPX Flow (FLOW) and ABB (ABB). 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.
SPX Flow has a Zacks Rank of #1 (Strong Buy), while ABB has 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 FLOW is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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 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.
FLOW currently has a forward P/E ratio of 22.05, while ABB has a forward P/E of 23.10. We also note that FLOW has a PEG ratio of 2.40. 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. ABB currently has a PEG ratio of 3.73.
Another notable valuation metric for FLOW is its P/B ratio of 1.97. 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, ABB has a P/B of 3.73.
These metrics, and several others, help FLOW earn a Value grade of B, while ABB has been given a Value grade of C.
FLOW sticks out from ABB in both our Zacks Rank and Style Scores models, so value investors will likely feel that FLOW is the better option right now.
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