DAKT vs. ROK: Which Stock Is the Better Value Option?

Investors looking for stocks in the Electronics - Miscellaneous Products sector might want to consider either Daktronics (DAKT) or Rockwell Automation (ROK). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Daktronics has a Zacks Rank of #2 (Buy), while Rockwell Automation has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DAKT is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.

DAKT currently has a forward P/E ratio of 17.41, while ROK has a forward P/E of 31.77. We also note that DAKT has a PEG ratio of 0.58. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ROK currently has a PEG ratio of 3.28.

Another notable valuation metric for DAKT is its P/B ratio of 3.33. 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, ROK has a P/B of 11.33.

Based on these metrics and many more, DAKT holds a Value grade of A, while ROK has a Value grade of D.

DAKT stands above ROK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DAKT 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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