Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Legg Mason (LM) and Oaktree Capital Group, LLC (OAK). 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.
Both Legg Mason and Oaktree Capital Group, LLC have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 11.06, while OAK has a forward P/E of 14.89. We also note that LM has a PEG ratio of 0.67. 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. OAK currently has a PEG ratio of 1.39.
Another notable valuation metric for LM is its P/B ratio of 0.70. 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, OAK has a P/B of 3.76.
These are just a few of the metrics contributing to LM's Value grade of A and OAK's Value grade of D.
Both LM and OAK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LM is the superior value option right now.
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Legg Mason, Inc. (LM) : Free Stock Analysis Report
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