Investors interested in Metal Products - Procurement and Fabrication stocks are likely familiar with AB SKF (SKFRY) and Timken (TKR). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both AB SKF and Timken have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture 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.
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.
SKFRY currently has a forward P/E ratio of 15.04, while TKR has a forward P/E of 16.02. We also note that SKFRY has a PEG ratio of 1.25. 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. TKR currently has a PEG ratio of 2.15.
Another notable valuation metric for SKFRY is its P/B ratio of 2.44. 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, TKR has a P/B of 2.90.
These are just a few of the metrics contributing to SKFRY's Value grade of B and TKR's Value grade of C.
Both SKFRY and TKR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SKFRY is the superior value option right now.
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