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OC vs. AWI: Which Stock Should Value Investors Buy Now?

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Zacks Equity Research
·2 min read
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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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Right now, Owens Corning is sporting a Zacks Rank of #2 (Buy), while Armstrong World Industries has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that OC has an improving earnings outlook. But this is only part of the picture 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.

OC currently has a forward P/E ratio of 13.92, while AWI has a forward P/E of 24.14. We also note that OC has a PEG ratio of 0.99. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AWI currently has a PEG ratio of 6.56.

Another notable valuation metric for OC is its P/B ratio of 2.50. 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 9.80.

These are just a few of the metrics contributing to OC's Value grade of A and AWI's Value grade of D.

OC 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 OC is likely the superior value option right now.


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Zacks Investment Research