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RXN or AOS: Which Is the Better Value Stock Right Now?

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Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Rexnord (RXN) and A.O. Smith (AOS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, both Rexnord and A.O. Smith are holding 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 these stocks have improving earnings outlooks. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

RXN currently has a forward P/E ratio of 21.43, while AOS has a forward P/E of 27.68. We also note that RXN has a PEG ratio of 2.56. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AOS currently has a PEG ratio of 3.08.

Another notable valuation metric for RXN is its P/B ratio of 3.26. 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 5.07.

These metrics, and several others, help RXN earn a Value grade of B, while AOS has been given a Value grade of C.

Both RXN and AOS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RXN is the superior value option right now.


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Rexnord Corporation (RXN) : Free Stock Analysis Report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
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