HRI vs. WAB: Which Stock Is the Better Value Option?

Investors with an interest in Transportation - Equipment and Leasing stocks have likely encountered both Herc Holdings (HRI) and Westinghouse Air Brake Technologies (WAB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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 Herc Holdings and Westinghouse Air Brake Technologies are sporting a Zacks Rank of #2 (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. However, value investors will care about much more than just this.

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.

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.

HRI currently has a forward P/E ratio of 17.45, while WAB has a forward P/E of 22.72. We also note that HRI has a PEG ratio of 1.33. 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. WAB currently has a PEG ratio of 1.57.

Another notable valuation metric for HRI is its P/B ratio of 2.47. 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, WAB has a P/B of 3.55.

These are just a few of the metrics contributing to HRI's Value grade of A and WAB's Value grade of D.

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