Investors interested in stocks from the Engineering - R and D Services sector have probably already heard of Quanta Services (PWR) and ROTORK PLC (RTOXY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Quanta Services has a Zacks Rank of #1 (Strong Buy), while ROTORK PLC has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PWR is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PWR currently has a forward P/E ratio of 12.46, while RTOXY has a forward P/E of 25.37. We also note that PWR has a PEG ratio of 0.86. 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. RTOXY currently has a PEG ratio of 2.03.
Another notable valuation metric for PWR is its P/B ratio of 1.47. 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, RTOXY has a P/B of 5.60.
These metrics, and several others, help PWR earn a Value grade of A, while RTOXY has been given a Value grade of D.
PWR has seen stronger estimate revision activity and sports more attractive valuation metrics than RTOXY, so it seems like value investors will conclude that PWR is the superior option right now.
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