GL vs. MCO: Which Stock Is the Better Value Option?
Investors interested in stocks from the Financial - Miscellaneous Services sector have probably already heard of Torchmark (GL) and Moody's (MCO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Right now, Torchmark is sporting a Zacks Rank of #2 (Buy), while Moody's has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GL is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GL currently has a forward P/E ratio of 14.08, while MCO has a forward P/E of 26.49. We also note that GL has a PEG ratio of 1.85. 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. MCO currently has a PEG ratio of 2.65.
Another notable valuation metric for GL is its P/B ratio of 1.55. 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, MCO has a P/B of 70.12.
These metrics, and several others, help GL earn a Value grade of B, while MCO has been given a Value grade of F.
GL 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 GL is likely the superior value option right now.
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