GLDD vs. DY: Which Stock Is the Better Value Option?

Investors interested in Building Products - Heavy Construction stocks are likely familiar with Great Lakes Dredge & Dock (GLDD) and Dycom Industries (DY). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Great Lakes Dredge & Dock and Dycom Industries are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GLDD 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 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.

GLDD currently has a forward P/E ratio of 11.59, while DY has a forward P/E of 27.45. We also note that GLDD has a PEG ratio of 0.97. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DY currently has a PEG ratio of 1.31.

Another notable valuation metric for GLDD is its P/B ratio of 1.66. 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, DY has a P/B of 5.81.

These are just a few of the metrics contributing to GLDD's Value grade of A and DY's Value grade of C.

GLDD has seen stronger estimate revision activity and sports more attractive valuation metrics than DY, so it seems like value investors will conclude that GLDD is the superior option right now.

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

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