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ITT vs. DHR: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Diversified Operations sector might want to consider either ITT (ITT) or Danaher (DHR). 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 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.

Currently, ITT has a Zacks Rank of #2 (Buy), while Danaher 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 ITT has an improving earnings outlook. However, value investors will care about much more than just this.

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.

ITT currently has a forward P/E ratio of 18.08, while DHR has a forward P/E of 30.22. We also note that ITT has a PEG ratio of 2.01. 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. DHR currently has a PEG ratio of 2.78.

Another notable valuation metric for ITT is its P/B ratio of 3.06. 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, DHR has a P/B of 3.44.

These metrics, and several others, help ITT earn a Value grade of B, while DHR has been given a Value grade of D.

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


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