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 offers value investors a better bang for their buck right now? We'll need to take a closer look.
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, Tennant is sporting a Zacks Rank of #1 (Strong Buy), while Idex has a Zacks Rank of #4 (Sell). This means that TNC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
TNC currently has a forward P/E ratio of 13.10, while IEX has a forward P/E of 23.52. We also note that TNC has a PEG ratio of 1.31. 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 2.35.
Another notable valuation metric for TNC is its P/B ratio of 2.70. 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, IEX has a P/B of 4.41.
These metrics, and several others, help TNC earn a Value grade of B, while IEX has been given 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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