Investors interested in Financial - Investment Management stocks are likely familiar with Affiliated Managers Group (AMG) and T. Rowe Price (TROW). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Affiliated Managers Group and T. Rowe Price are sporting a Zacks Rank of #1 (Strong Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
AMG currently has a forward P/E ratio of 10.22, while TROW has a forward P/E of 10.50. We also note that AMG has a PEG ratio of 0.57. 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. TROW currently has a PEG ratio of 3.30.
Another notable valuation metric for AMG is its P/B ratio of 1.71. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TROW has a P/B of 2.03.
Based on these metrics and many more, AMG holds a Value grade of B, while TROW has a Value grade of C.
Both AMG and TROW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AMG is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Affiliated Managers Group, Inc. (AMG): Free Stock Analysis Report T. Rowe Price Group, Inc. (TROW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
