POWL vs. ABBNY: Which Stock Is the Better Value Option?

Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Powell Industries (POWL) and ABB (ABBNY). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Powell Industries and ABB are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that POWL likely has seen a stronger improvement to its earnings outlook than ABBNY has recently. However, value investors will care about much more than just this.

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 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.

POWL currently has a forward P/E ratio of 16.37, while ABBNY has a forward P/E of 26.93. We also note that POWL has a PEG ratio of 1.17. 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. ABBNY currently has a PEG ratio of 2.11.

Another notable valuation metric for POWL is its P/B ratio of 4.73. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ABBNY has a P/B of 8.32.

Based on these metrics and many more, POWL holds a Value grade of B, while ABBNY has a Value grade of C.

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

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

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