Investors interested in Building Products - Miscellaneous stocks are likely familiar with Patrick Industries (PATK) and Continental Building Products (CBPX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Patrick Industries is sporting a Zacks Rank of #2 (Buy), while Continental Building Products has a Zacks Rank of #5 (Strong Sell). This means that PATK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
PATK currently has a forward P/E ratio of 10.06, while CBPX has a forward P/E of 13.06. We also note that PATK has a PEG ratio of 1.43. 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. CBPX currently has a PEG ratio of 2.61.
Another notable valuation metric for PATK is its P/B ratio of 2.40. 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, CBPX has a P/B of 2.59.
These are just a few of the metrics contributing to PATK's Value grade of A and CBPX's Value grade of D.
PATK stands above CBPX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PATK is the superior value option right now.
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