GLDD vs. DY: Which Stock Is the Better Value Option?

Investors interested in Building Products - Heavy Construction stocks are likely familiar with Great Lakes Dredge & Dock (GLDD) and Dycom Industries (DY). 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.

Right now, both Great Lakes Dredge & Dock and Dycom Industries are sporting a Zacks Rank of #1 (Strong Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.

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.

GLDD currently has a forward P/E ratio of 11.74, while DY has a forward P/E of 33.52. We also note that GLDD has a PEG ratio of 0.98. 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. DY currently has a PEG ratio of 1.85.

Another notable valuation metric for GLDD is its P/B ratio of 1.74. 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, DY has a P/B of 6.92.

These metrics, and several others, help GLDD earn a Value grade of A, while DY has been given a Value grade of D.

Both GLDD and DY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GLDD 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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