Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of Tennant (TNC) and Idex (IEX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Currently, Tennant has a Zacks Rank of #1 (Strong Buy), while Idex has a Zacks Rank of #4 (Sell). 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 15.26, while IEX has a forward P/E of 30.09. We also note that TNC has a PEG ratio of 1.53. 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. IEX currently has a PEG ratio of 3.01.
Another notable valuation metric for TNC is its P/B ratio of 3.15. 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, IEX has a P/B of 5.05.
Based on these metrics and many more, TNC holds a Value grade of B, while IEX has a Value grade of F.
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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