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OC vs. AWI: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Owens Corning (OC) or Armstrong World Industries (AWI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Owens Corning and Armstrong World Industries are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that OC likely has seen a stronger improvement to its earnings outlook than AWI has recently. But this is just one factor that value investors are interested in.

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.

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.

OC currently has a forward P/E ratio of 8.73, while AWI has a forward P/E of 17.61. We also note that OC has a PEG ratio of 0.62. 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. AWI currently has a PEG ratio of 0.98.

Another notable valuation metric for OC is its P/B ratio of 2.10. 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, AWI has a P/B of 8.07.

Based on these metrics and many more, OC holds a Value grade of A, while AWI has a Value grade of C.

OC stands above AWI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that OC is the superior value option right now.


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