Investors looking for stocks in the Waste Removal Services sector might want to consider either H20 (HTO) or Waste Management (WM). But which of these two companies is the best option for those looking for undervalued stocks? 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 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, H20 is sporting a Zacks Rank of #2 (Buy), while Waste Management has a Zacks Rank of #3 (Hold). This means that HTO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
HTO currently has a forward P/E ratio of 15.97, while WM has a forward P/E of 28.50. We also note that HTO has a PEG ratio of 2.44. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WM currently has a PEG ratio of 2.64.
Another notable valuation metric for HTO is its P/B ratio of 1.12. 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, WM has a P/B of 9.06.
These are just a few of the metrics contributing to HTO's Value grade of A and WM's Value grade of C.
HTO stands above WM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HTO is the superior value option right now.
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H2O America (HTO): Free Stock Analysis Report Waste Management, Inc. (WM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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