MSM vs. GWW: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Industrial Services sector have probably already heard of MSC Industrial (MSM) and W.W. Grainger (GWW). 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.
Right now, MSC Industrial is sporting a Zacks Rank of #2 (Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MSM 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
MSM currently has a forward P/E ratio of 12.96, while GWW has a forward P/E of 16.69. We also note that MSM has a PEG ratio of 0.95. 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. GWW currently has a PEG ratio of 1.35.
Another notable valuation metric for MSM is its P/B ratio of 3.09. 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, GWW has a P/B of 7.27.
Based on these metrics and many more, MSM holds a Value grade of B, while GWW has a Value grade of C.
MSM has seen stronger estimate revision activity and sports more attractive valuation metrics than GWW, so it seems like value investors will conclude that MSM is the superior option right now.
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MSC Industrial Direct Company, Inc. (MSM) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
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