Investors interested in Insurance - Property and Casualty stocks are likely familiar with Essent Group (ESNT) and Berkshire Hathaway B (BRK.B). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Essent Group has a Zacks Rank of #2 (Buy), while Berkshire Hathaway B has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ESNT likely has seen a stronger improvement to its earnings outlook than BRK.B has recently. 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.
ESNT currently has a forward P/E ratio of 8.33, while BRK.B has a forward P/E of 24.01. We also note that ESNT has a PEG ratio of 2.56. 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. BRK.B currently has a PEG ratio of 3.43.
Another notable valuation metric for ESNT is its P/B ratio of 1.06. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, BRK.B has a P/B of 1.57.
These are just a few of the metrics contributing to ESNT's Value grade of B and BRK.B's Value grade of D.
ESNT stands above BRK.B thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ESNT is the superior value option right now.
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Essent Group Ltd. (ESNT): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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