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TNC or ITW: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 min read

Investors interested in Manufacturing - General Industrial stocks are likely familiar with Tennant (TNC) and Illinois Tool Works (ITW). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

Right now, Tennant is sporting a Zacks Rank of #2 (Buy), while Illinois Tool Works has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TNC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

TNC currently has a forward P/E ratio of 21.55, while ITW has a forward P/E of 31.86. We also note that TNC has a PEG ratio of 2.15. 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. ITW currently has a PEG ratio of 4.50.

Another notable valuation metric for TNC is its P/B ratio of 2.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ITW has a P/B of 23.72.

These metrics, and several others, help TNC earn a Value grade of B, while ITW has been given a Value grade of D.

TNC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TNC is likely the superior value option right now.


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Tennant Company (TNC) : Free Stock Analysis Report
 
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
 
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