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RBC vs. AOS: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 mins read

Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Regal Beloit (RBC) and A.O. Smith (AOS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

Regal Beloit has a Zacks Rank of #2 (Buy), while A.O. Smith has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that RBC has an improving earnings outlook. However, value investors will care about much more than just this.

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 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.

RBC currently has a forward P/E ratio of 20.97, while AOS has a forward P/E of 26.95. We also note that RBC has a PEG ratio of 2.10. 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. AOS currently has a PEG ratio of 3.37.

Another notable valuation metric for RBC is its P/B ratio of 1.69. 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, AOS has a P/B of 5.61.

Based on these metrics and many more, RBC holds a Value grade of B, while AOS has a Value grade of C.

RBC sticks out from AOS in both our Zacks Rank and Style Scores models, so value investors will likely feel that RBC is the better option right now.


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Regal Beloit Corporation (RBC) : Free Stock Analysis Report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
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