Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Franklin Resources (BEN) and BlackRock (BLK). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, Franklin Resources is sporting a Zacks Rank of #2 (Buy), while BlackRock has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BEN has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BEN currently has a forward P/E ratio of 8.96, while BLK has a forward P/E of 23.74. We also note that BEN has a PEG ratio of 1.63. 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. BLK currently has a PEG ratio of 1.95.
Another notable valuation metric for BEN is its P/B ratio of 0.9. 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, BLK has a P/B of 3.55.
These are just a few of the metrics contributing to BEN's Value grade of A and BLK's Value grade of D.
BEN sticks out from BLK in both our Zacks Rank and Style Scores models, so value investors will likely feel that BEN is the better option right now.
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Franklin Resources, Inc. (BEN): Free Stock Analysis Report BlackRock (BLK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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