Investors looking for stocks in the Paper and Related Products sector might want to consider either Suzano S.A. Sponsored ADR (SUZ) or Klabin SA (KLBAY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Suzano S.A. Sponsored ADR has a Zacks Rank of #2 (Buy), while Klabin SA has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SUZ is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
SUZ currently has a forward P/E ratio of 4.77, while KLBAY has a forward P/E of 10.64. We also note that SUZ has a PEG ratio of 0.10. 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. KLBAY currently has a PEG ratio of 0.51.
Another notable valuation metric for SUZ is its P/B ratio of 1.69. 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, KLBAY has a P/B of 10.73.
These metrics, and several others, help SUZ earn a Value grade of A, while KLBAY has been given a Value grade of C.
SUZ has seen stronger estimate revision activity and sports more attractive valuation metrics than KLBAY, so it seems like value investors will conclude that SUZ is the superior option right now.
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Suzano S.A. Sponsored ADR (SUZ): Free Stock Analysis Report Klabin SA (KLBAY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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