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UL vs. CLX: Which Stock Is the Better Value Option?

Zacks Equity Research
Xerox (XRX) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors looking for stocks in the Soap and Cleaning Materials sector might want to consider either Unilever PLC (UL) or Clorox (CLX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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.

Unilever PLC has a Zacks Rank of #1 (Strong Buy), while Clorox has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UL has an improving earnings outlook. But this is only part of the picture for value investors.

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.

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.

UL currently has a forward P/E ratio of 20.12, while CLX has a forward P/E of 24.63. We also note that UL has a PEG ratio of 3.49. 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. CLX currently has a PEG ratio of 3.87.

Another notable valuation metric for UL is its P/B ratio of 4.60. 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, CLX has a P/B of 26.94.

These metrics, and several others, help UL earn a Value grade of B, while CLX has been given a Value grade of C.

UL sticks out from CLX in both our Zacks Rank and Style Scores models, so value investors will likely feel that UL is the better option right now.


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