Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Newell Brands (NWL) and WD-40 (WDFC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Newell Brands has a Zacks Rank of #1 (Strong Buy), while WD-40 has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NWL 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
NWL currently has a forward P/E ratio of 9.61, while WDFC has a forward P/E of 35.53. We also note that NWL has a PEG ratio of 1.60. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WDFC currently has a PEG ratio of 3.55.
Another notable valuation metric for NWL is its P/B ratio of 1.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WDFC has a P/B of 14.35.
Based on these metrics and many more, NWL holds a Value grade of B, while WDFC has a Value grade of D.
NWL stands above WDFC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NWL is 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
Newell Brands Inc. (NWL) : Free Stock Analysis Report
WD-40 Company (WDFC) : Free Stock Analysis Report
To read this article on Zacks.com click here.