Investors interested in Industrial Services stocks are likely familiar with ScanSource (SCSC) and SiteOne Landscape (SITE). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, ScanSource has a Zacks Rank of #2 (Buy), while SiteOne Landscape 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 SCSC is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
SCSC currently has a forward P/E ratio of 11.11, while SITE has a forward P/E of 36.70. We also note that SCSC has a PEG ratio of 0.74. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SITE currently has a PEG ratio of 2.18.
Another notable valuation metric for SCSC is its P/B ratio of 1.1. 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, SITE has a P/B of 3.49.
These are just a few of the metrics contributing to SCSC's Value grade of A and SITE's Value grade of C.
SCSC stands above SITE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SCSC is the superior value option right now.
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ScanSource, Inc. (SCSC): Free Stock Analysis Report SiteOne Landscape Supply, Inc. (SITE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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