Investors interested in Technology Services stocks are likely familiar with Trane Technologies (TT) and Evoqua Water (AQUA). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Trane Technologies has a Zacks Rank of #2 (Buy), while Evoqua Water has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TT 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TT currently has a forward P/E ratio of 23.43, while AQUA has a forward P/E of 39.08. We also note that TT has a PEG ratio of 1.99. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AQUA currently has a PEG ratio of 2.61.
Another notable valuation metric for TT is its P/B ratio of 6.58. 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, AQUA has a P/B of 7.
These are just a few of the metrics contributing to TT's Value grade of B and AQUA's Value grade of C.
TT stands above AQUA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TT is the superior value option right now.
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Trane Technologies plc (TT) : Free Stock Analysis Report
Evoqua Water Technologies (AQUA) : Free Stock Analysis Report
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