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GMS vs. LL: Which Stock Is the Better Value Option?

Zacks Equity Research
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Investors looking for stocks in the Building Products - Retail sector might want to consider either GMS Inc. (GMS) or Lumber Liquidators Holdings (LL). 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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

GMS Inc. has a Zacks Rank of #2 (Buy), while Lumber Liquidators Holdings has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GMS has an improving earnings outlook. 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 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.

GMS currently has a forward P/E ratio of 5.45, while LL has a forward P/E of 26.90. We also note that GMS has a PEG ratio of 0.78. 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. LL currently has a PEG ratio of 0.98.

Another notable valuation metric for GMS is its P/B ratio of 1.19. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LL has a P/B of 1.76.

Based on these metrics and many more, GMS holds a Value grade of B, while LL has a Value grade of C.

GMS stands above LL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GMS is the superior value option right now.


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GMS Inc. (GMS) : Free Stock Analysis Report
 
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