VWDRY vs. ETN: Which Stock Is the Better Value Option?

Investors interested in Manufacturing - Electronics stocks are likely familiar with Vestas Wind Systems AS (VWDRY) and Eaton (ETN). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Vestas Wind Systems AS has a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #3 (Hold) right now. This means that VWDRY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

VWDRY currently has a forward P/E ratio of 22.26, while ETN has a forward P/E of 32.46. We also note that VWDRY has a PEG ratio of 0.67. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ETN currently has a PEG ratio of 2.94.

Another notable valuation metric for VWDRY is its P/B ratio of 5.26. 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, ETN has a P/B of 8.23.

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

VWDRY sticks out from ETN in both our Zacks Rank and Style Scores models, so value investors will likely feel that VWDRY is the better option right now.

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

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