TEX vs. CAT: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Manufacturing - Construction and Mining sector have probably already heard of Terex (TEX) and Caterpillar (CAT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Terex and Caterpillar are sporting a Zacks Rank of # 1 (Strong 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. But this is only part of the picture 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TEX currently has a forward P/E ratio of 8.13, while CAT has a forward P/E of 13.75. We also note that TEX has a PEG ratio of 0.45. 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. CAT currently has a PEG ratio of 1.15.
Another notable valuation metric for TEX is its P/B ratio of 2.71. 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, CAT has a P/B of 7.63.
These metrics, and several others, help TEX earn a Value grade of B, while CAT has been given a 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
