Investors with an interest in Soap and Cleaning Materials stocks have likely encountered both Unilever PLC (UL) and 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Unilever PLC has a Zacks Rank of #1 (Strong Buy), while Clorox has a Zacks Rank of #3 (Hold) right now. This means that UL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
UL currently has a forward P/E ratio of 20.25, while CLX has a forward P/E of 24.57. We also note that UL has a PEG ratio of 3.44. 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. CLX currently has a PEG ratio of 3.86.
Another notable valuation metric for UL is its P/B ratio of 4.63. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CLX has a P/B of 26.88.
These metrics, and several others, help UL earn a Value grade of B, while CLX has been given a Value grade of D.
UL 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 UL is likely the superior value option right now.
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