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HDS or GWW: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Vanda (VNDA) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Investors with an interest in Industrial Services stocks have likely encountered both HD Supply (HDS) and W.W. Grainger (GWW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, HD Supply is sporting a Zacks Rank of #2 (Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HDS has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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.

HDS currently has a forward P/E ratio of 13.53, while GWW has a forward P/E of 20.83. We also note that HDS has a PEG ratio of 0.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GWW currently has a PEG ratio of 1.72.

Another notable valuation metric for HDS is its P/B ratio of 5.48. 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, GWW has a P/B of 9.03.

These are just a few of the metrics contributing to HDS's Value grade of B and GWW's Value grade of C.

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


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HD Supply Holdings, Inc. (HDS) : Free Stock Analysis Report
 
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
 
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