NX vs. JHX: Which Stock Is the Better Value Option?

Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of Quanex Building Products (NX) and James Hardie (JHX). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Quanex Building Products has a Zacks Rank of #2 (Buy), while James Hardie has a Zacks Rank of #5 (Strong Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NX has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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.

NX currently has a forward P/E ratio of 7.52, while JHX has a forward P/E of 20.52. We also note that NX has a PEG ratio of 0.54. 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. JHX currently has a PEG ratio of 1.78.

Another notable valuation metric for NX is its P/B ratio of 0.9. 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, JHX has a P/B of 5.31.

These are just a few of the metrics contributing to NX's Value grade of A and JHX's Value grade of D.

NX 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 NX is likely the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research