Investors looking for stocks in the Chemical - Plastic sector might want to consider either Westlake Chemical (WLK) or PolyOne (POL). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Westlake Chemical has a Zacks Rank of #1 (Strong Buy), while PolyOne has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WLK is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
WLK currently has a forward P/E ratio of 11.95, while POL has a forward P/E of 17.04. We also note that WLK has a PEG ratio of 0.98. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. POL currently has a PEG ratio of 1.64.
Another notable valuation metric for WLK is its P/B ratio of 2.48. 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, POL has a P/B of 5.98.
These are just a few of the metrics contributing to WLK's Value grade of B and POL's Value grade of C.
WLK 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 WLK is likely the superior value option right now.
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