Investors with an interest in Financial - Investment Management stocks have likely encountered both Legg Mason (LM) and Federated Investors (FII). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Legg Mason has a Zacks Rank of #2 (Buy), while Federated Investors has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LM likely has seen a stronger improvement to its earnings outlook than FII has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LM currently has a forward P/E ratio of 11.31, while FII has a forward P/E of 13. We also note that LM has a PEG ratio of 0.69. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FII currently has a PEG ratio of 1.90.
Another notable valuation metric for LM is its P/B ratio of 0.87. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FII has a P/B of 3.54.
These are just a few of the metrics contributing to LM's Value grade of A and FII's Value grade of C.
LM sticks out from FII in both our Zacks Rank and Style Scores models, so value investors will likely feel that LM is the better option right now.
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Legg Mason, Inc. (LM) : Free Stock Analysis Report
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