Investors interested in Diversified Operations stocks are likely familiar with Sumitomo Corp. (SSUMY) and ITT (ITT). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Both Sumitomo Corp. and ITT have a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle 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.
SSUMY currently has a forward P/E ratio of 9.61, while ITT has a forward P/E of 26.82. We also note that SSUMY has a PEG ratio of 1.90. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ITT currently has a PEG ratio of 2.15.
Another notable valuation metric for SSUMY is its P/B ratio of 1.07. 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, ITT has a P/B of 5.31.
These metrics, and several others, help SSUMY earn a Value grade of A, while ITT has been given a Value grade of D.
Both SSUMY and ITT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SSUMY is the superior value option right now.
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Sumitomo Corp. (SSUMY): Free Stock Analysis Report ITT Inc. (ITT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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