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UTX or DHR: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Palo Alto (PANW) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Investors with an interest in Diversified Operations stocks have likely encountered both United Technologies (UTX) and Danaher (DHR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, United Technologies is sporting a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UTX is likely seeing its earnings outlook improve to a greater extent. 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.

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.

UTX currently has a forward P/E ratio of 16.57, while DHR has a forward P/E of 27.33. We also note that UTX has a PEG ratio of 1.88. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DHR currently has a PEG ratio of 2.40.

Another notable valuation metric for UTX is its P/B ratio of 2.59. 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, DHR has a P/B of 3.25.

These metrics, and several others, help UTX earn a Value grade of B, while DHR has been given a Value grade of D.

UTX 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 UTX is likely the superior value option right now.


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United Technologies Corporation (UTX) : Free Stock Analysis Report
 
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