Investors interested in stocks from the Transportation - Shipping sector have probably already heard of Seaspan (SSW) and Kirby (KEX). 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 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.
Seaspan and Kirby are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that SSW likely has seen a stronger improvement to its earnings outlook than KEX has recently. But this is just one factor that value investors are interested in.
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.
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.
SSW currently has a forward P/E ratio of 14.02, while KEX has a forward P/E of 28.38. We also note that SSW has a PEG ratio of 1.17. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. KEX currently has a PEG ratio of 2.83.
Another notable valuation metric for SSW is its P/B ratio of 0.72. 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, KEX has a P/B of 1.50.
These metrics, and several others, help SSW earn a Value grade of A, while KEX has been given a Value grade of C.
SSW has seen stronger estimate revision activity and sports more attractive valuation metrics than KEX, so it seems like value investors will conclude that SSW is the superior option right now.
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