Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of EnPro Industries (NPO) and Idex (IEX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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 EnPro Industries and Idex have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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 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.
NPO currently has a forward P/E ratio of 19.89, while IEX has a forward P/E of 24.98. We also note that NPO has a PEG ratio of 1.47. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. IEX currently has a PEG ratio of 2.44.
Another notable valuation metric for NPO is its P/B ratio of 1.64. 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, IEX has a P/B of 4.99.
These are just a few of the metrics contributing to NPO's Value grade of B and IEX's Value grade of D.
Both NPO and IEX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NPO is the superior value option right now.
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