TEX vs. CAT: Which Stock Is the Better Value Option?
Investors looking for stocks in the Manufacturing - Construction and Mining sector might want to consider either Terex (TEX) or Caterpillar (CAT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Terex and Caterpillar are holding a Zacks Rank of # 1 (Strong Buy). 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 just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TEX currently has a forward P/E ratio of 8.66, while CAT has a forward P/E of 14.14. We also note that TEX has a PEG ratio of 0.48. 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. CAT currently has a PEG ratio of 1.18.
Another notable valuation metric for TEX is its P/B ratio of 2.78. 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, CAT has a P/B of 7.83.
These are just a few of the metrics contributing to TEX's Value grade of A and CAT's Value grade of C.
Both TEX and CAT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TEX is the superior value option right now.
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Terex Corporation (TEX) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
