Investors interested in stocks from the Diversified Operations sector have probably already heard of Orkla Asa (ORKLY) and United Technologies (UTX). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Orkla Asa and United Technologies have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
ORKLY currently has a forward P/E ratio of 2.45, while UTX has a forward P/E of 17.66. We also note that ORKLY has a PEG ratio of 0.72. 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. UTX currently has a PEG ratio of 2.01.
Another notable valuation metric for ORKLY is its P/B ratio of 2.45. 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, UTX has a P/B of 2.90.
These are just a few of the metrics contributing to ORKLY's Value grade of B and UTX's Value grade of C.
Both ORKLY and UTX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ORKLY is the superior value option right now.
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