GEN vs. TT: Which Stock Is the Better Value Option?

Investors with an interest in Technology Services stocks have likely encountered both Gen Digital (GEN) and Trane Technologies (TT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Right now, Gen Digital is sporting a Zacks Rank of #2 (Buy), while Trane Technologies has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GEN likely has seen a stronger improvement to its earnings outlook than TT has recently. 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.

GEN currently has a forward P/E ratio of 10.90, while TT has a forward P/E of 30.05. We also note that GEN has a PEG ratio of 0.83. 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. TT currently has a PEG ratio of 2.25.

Another notable valuation metric for GEN is its P/B ratio of 6.94. 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, TT has a P/B of 10.39.

These are just a few of the metrics contributing to GEN's Value grade of B and TT's Value grade of C.

GEN has seen stronger estimate revision activity and sports more attractive valuation metrics than TT, so it seems like value investors will conclude that GEN is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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