HRI or WAB: Which Is the Better Value Stock Right Now?

Investors with an interest in Transportation - Equipment and Leasing stocks have likely encountered both Herc Holdings (HRI) and Westinghouse Air Brake Technologies (WAB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Both Herc Holdings and Westinghouse Air Brake Technologies have a Zacks Rank of #2 (Buy) right now. 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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

HRI currently has a forward P/E ratio of 18.42, while WAB has a forward P/E of 21.82. We also note that HRI has a PEG ratio of 1.40. 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. WAB currently has a PEG ratio of 1.50.

Another notable valuation metric for HRI is its P/B ratio of 2.18. 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, WAB has a P/B of 3.06.

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

Both HRI and WAB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HRI is the superior value option right now.

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

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