Investors interested in stocks from the Containers - Paper and Packaging sector have probably already heard of Karat Packing (KRT) and Packaging Corp. (PKG). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Karat Packing and Packaging Corp. are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
KRT currently has a forward P/E ratio of 14.52, while PKG has a forward P/E of 20.12. We also note that KRT has a PEG ratio of 1.20. 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. PKG currently has a PEG ratio of 1.22.
Another notable valuation metric for KRT is its P/B ratio of 2.95. 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, PKG has a P/B of 4.04.
Based on these metrics and many more, KRT holds a Value grade of B, while PKG has a Value grade of C.
Both KRT and PKG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KRT is the superior value option right now.
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Karat Packaging Inc. (KRT): Free Stock Analysis Report Packaging Corporation of America (PKG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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