Investors interested in stocks from the Industrial Services sector have probably already heard of Global Industrial (GIC) and W.W. Grainger (GWW). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Right now, Global Industrial is sporting a Zacks Rank of #1 (Strong Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GIC 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 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.
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.
GIC currently has a forward P/E ratio of 16.94, while GWW has a forward P/E of 23.04. We also note that GIC has a PEG ratio of 1.06. 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. GWW currently has a PEG ratio of 2.44.
Another notable valuation metric for GIC is its P/B ratio of 4.18. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GWW has a P/B of 10.97.
These are just a few of the metrics contributing to GIC's Value grade of B and GWW's Value grade of C.
GIC 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 GIC is likely the superior value option right now.
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Global Industrial Company (GIC): Free Stock Analysis Report W.W. Grainger, Inc. (GWW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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