Investors interested in Metal Products - Procurement and Fabrication stocks are likely familiar with Timken (TKR) and TriMas (TRS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Timken and TriMas are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TKR has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
TKR currently has a forward P/E ratio of 11.20, while TRS has a forward P/E of 17.12. We also note that TKR has a PEG ratio of 1.26. 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. TRS currently has a PEG ratio of 3.42.
Another notable valuation metric for TKR is its P/B ratio of 2.24. 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, TRS has a P/B of 2.36.
These are just a few of the metrics contributing to TKR's Value grade of B and TRS's Value grade of C.
TKR stands above TRS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TKR is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Timken Company (The) (TKR) : Free Stock Analysis Report
TriMas Corporation (TRS) : Free Stock Analysis Report
To read this article on Zacks.com click here.