Investors interested in stocks from the Chemical - Plastic sector have probably already heard of NEXEO SOLUTIONS (NXEO) and PolyOne (POL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, NEXEO SOLUTIONS is sporting a Zacks Rank of #1 (Strong Buy), while PolyOne has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NXEO is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
NXEO currently has a forward P/E ratio of 10.44, while POL has a forward P/E of 13.72. We also note that NXEO has a PEG ratio of 0.53. 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. POL currently has a PEG ratio of 1.37.
Another notable valuation metric for NXEO is its P/B ratio of 1.09. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, POL has a P/B of 4.30.
These are just a few of the metrics contributing to NXEO's Value grade of B and POL's Value grade of C.
NXEO 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 NXEO is likely the superior value option right now.
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