ENS or ETN: Which Is the Better Value Stock Right Now?

Investors interested in Manufacturing - Electronics stocks are likely familiar with EnerSys (ENS) and Eaton (ETN). 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 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.

EnerSys has a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #3 (Hold) right now. This means that ENS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

ENS currently has a forward P/E ratio of 14.41, while ETN has a forward P/E of 26.60. We also note that ENS has a PEG ratio of 0.96. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ETN currently has a PEG ratio of 2.33.

Another notable valuation metric for ENS is its P/B ratio of 2.97. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ETN has a P/B of 6.61.

These metrics, and several others, help ENS earn a Value grade of B, while ETN has been given a Value grade of D.

ENS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ENS is likely the superior value option right now.

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

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