Investors interested in Building Products - Heavy Construction stocks are likely familiar with Tutor Perini (TPC) and Granite Construction (GVA). 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.
Tutor Perini has a Zacks Rank of #2 (Buy), while Granite Construction has a Zacks Rank of #5 (Strong Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TPC has an improving earnings outlook. But this is just one piece of the puzzle 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
TPC currently has a forward P/E ratio of 9.42, while GVA has a forward P/E of 15.88. We also note that TPC has a PEG ratio of 0.94. 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. GVA currently has a PEG ratio of 2.27.
Another notable valuation metric for TPC is its P/B ratio of 0.56. 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, GVA has a P/B of 1.54.
These metrics, and several others, help TPC earn a Value grade of A, while GVA has been given a Value grade of D.
TPC has seen stronger estimate revision activity and sports more attractive valuation metrics than GVA, so it seems like value investors will conclude that TPC is the superior option right now.
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Tutor Perini Corporation (TPC) : Free Stock Analysis Report
Granite Construction Incorporated (GVA) : Free Stock Analysis Report
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