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

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·2 min read
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Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Owens Corning (OC) and Construction Partners (ROAD). But which of these two stocks presents investors with the better value opportunity right now? 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.

Owens Corning and Construction Partners are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that OC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

OC currently has a forward P/E ratio of 14.84, while ROAD has a forward P/E of 32.90. We also note that OC has a PEG ratio of 1.06. 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. ROAD currently has a PEG ratio of 1.97.

Another notable valuation metric for OC is its P/B ratio of 2.67. 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, ROAD has a P/B of 3.97.

These metrics, and several others, help OC earn a Value grade of A, while ROAD has been given a Value grade of C.

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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