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FLS vs. XYL: Which Stock Is the Better Value Option?

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Zacks Equity Research
·2 min read
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Investors interested in Manufacturing - General Industrial stocks are likely familiar with Flowserve (FLS) and Xylem (XYL). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Flowserve and Xylem are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that FLS likely has seen a stronger improvement to its earnings outlook than XYL has recently. But this is only part of the picture for value investors.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

FLS currently has a forward P/E ratio of 16.43, while XYL has a forward P/E of 46.87. We also note that FLS has a PEG ratio of 3.26. 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. XYL currently has a PEG ratio of 4.69.

Another notable valuation metric for FLS is its P/B ratio of 2.12. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, XYL has a P/B of 5.43.

These metrics, and several others, help FLS earn a Value grade of B, while XYL has been given a Value grade of C.

FLS sticks out from XYL in both our Zacks Rank and Style Scores models, so value investors will likely feel that FLS is the better option right now.


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Flowserve Corporation (FLS) : Free Stock Analysis Report
 
Xylem Inc. (XYL) : Free Stock Analysis Report
 
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Zacks Investment Research