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HDS vs. GWW: Which Stock Is the Better Value Option?

Zacks Equity Research
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Investors interested in stocks from the Industrial Services sector have probably already heard of 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.

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 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.

HD Supply and W.W. Grainger are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HDS is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

HDS currently has a forward P/E ratio of 13.28, while GWW has a forward P/E of 20.50. We also note that HDS has a PEG ratio of 0.85. 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 1.70.

Another notable valuation metric for HDS is its P/B ratio of 5.37. 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 8.88.

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

HDS has seen stronger estimate revision activity and sports more attractive valuation metrics than GWW, so it seems like value investors will conclude that HDS is the superior 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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