Investors with an interest in Manufacturing - General Industrial stocks have likely encountered both Parker-Hannifin (PH) and Idex (IEX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Parker-Hannifin and Idex are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PH currently has a forward P/E ratio of 17.87, while IEX has a forward P/E of 31.91. We also note that PH has a PEG ratio of 1.52. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. IEX currently has a PEG ratio of 3.19.
Another notable valuation metric for PH is its P/B ratio of 3.53. 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, IEX has a P/B of 5.03.
These metrics, and several others, help PH earn a Value grade of A, while IEX has been given a Value grade of D.
PH 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 PH is likely the superior value option right now.
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