Investors interested in stocks from the Transportation - Services sector have probably already heard of ZTO Express (Cayman) Inc. (ZTO) and RXO (RXO). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
ZTO Express (Cayman) Inc. has a Zacks Rank of #2 (Buy), while RXO has a Zacks Rank of #4 (Sell) right now. This means that ZTO'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 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ZTO currently has a forward P/E ratio of 12.73, while RXO has a forward P/E of 124.94. We also note that ZTO has a PEG ratio of 4.11. 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. RXO currently has a PEG ratio of 8.33.
Another notable valuation metric for ZTO is its P/B ratio of 1.49. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RXO has a P/B of 1.77.
These are just a few of the metrics contributing to ZTO's Value grade of B and RXO's Value grade of F.
ZTO 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 ZTO is likely the superior value option right now.
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ZTO Express (Cayman) Inc. (ZTO): Free Stock Analysis Report RXO INC (RXO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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