U.S. Markets closed

LPX vs. WY: Which Stock Is the Better Value Option?

Zacks Equity Research
WF vs. BEN: Which Stock Is the Better Value Option?

Investors looking for stocks in the Building Products - Wood sector might want to consider either Louisiana-Pacific (LPX) or Weyerhaeuser (WY). But which of these two companies is the best option for those looking for undervalued stocks? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Louisiana-Pacific and Weyerhaeuser are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LPX 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 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.

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.

LPX currently has a forward P/E ratio of 8.65, while WY has a forward P/E of 22.67. We also note that LPX has a PEG ratio of 1.73. 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. WY currently has a PEG ratio of 4.53.

Another notable valuation metric for LPX is its P/B ratio of 2.31. 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, WY has a P/B of 2.94.

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

LPX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that LPX is likely the superior value option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Louisiana-Pacific Corporation (LPX) : Free Stock Analysis Report
 
Weyerhaeuser Company (WY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.