Investors interested in stocks from the Diversified Operations sector have probably already heard of United Technologies (UTX) and 3M (MMM). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
United Technologies has a Zacks Rank of #2 (Buy), while 3M has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UTX has an improving earnings outlook. But this is only part of the picture 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
UTX currently has a forward P/E ratio of 15.89, while MMM has a forward P/E of 18.45. We also note that UTX has a PEG ratio of 1.81. 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. MMM currently has a PEG ratio of 1.82.
Another notable valuation metric for UTX is its P/B ratio of 2.60. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MMM has a P/B of 10.15.
These are just a few of the metrics contributing to UTX's Value grade of B and MMM's Value grade of C.
UTX stands above MMM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UTX is the superior value option right now.
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United Technologies Corporation (UTX) : Free Stock Analysis Report
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