Investors with an interest in Manufacturing – Electronics stocks have likely encountered both Zurn Water (ZWS – Free Report) and Eaton (ETN – Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Zurn Water and Eaton are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ZWS is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
ZWS currently has a forward P/E ratio of 30.37, while ETN has a forward P/E of 30.99. We also note that ZWS has a PEG ratio of 1.91. 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. ETN currently has a PEG ratio of 2.50.
Another notable valuation metric for ZWS is its P/B ratio of 4.03. 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, ETN has a P/B of 6.90.
These metrics, and several others, help ZWS earn a Value grade of B, while ETN has been given a Value grade of C.
ZWS stands above ETN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ZWS is the superior value option right now.
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