Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Legg Mason (LM) and Apollo Global Management, LLC (APO). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Legg Mason has a Zacks Rank of #2 (Buy), while Apollo Global Management, LLC has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that LM likely has seen a stronger improvement to its earnings outlook than APO has recently. 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.
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.
LM currently has a forward P/E ratio of 11.15, while APO has a forward P/E of 14.78. We also note that LM has a PEG ratio of 0.64. 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. APO currently has a PEG ratio of 0.92.
Another notable valuation metric for LM is its P/B ratio of 0.89. 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, APO has a P/B of 3.79.
These metrics, and several others, help LM earn a Value grade of A, while APO has been given a Value grade of C.
LM sticks out from APO 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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