Investors looking for stocks in the Diversified Operations sector might want to consider either Sumitomo Corp. (SSUMY) or Honeywell International Inc. (HON). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Sumitomo Corp. has a Zacks Rank of #2 (Buy), while Honeywell International Inc. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SSUMY is likely seeing its earnings outlook improve to a greater extent. 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.
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.
SSUMY currently has a forward P/E ratio of 12.69, while HON has a forward P/E of 22.67. We also note that SSUMY has a PEG ratio of 1.47. 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. HON currently has a PEG ratio of 3.46.
Another notable valuation metric for SSUMY is its P/B ratio of 1.36. 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, HON has a P/B of 9.68.
These are just a few of the metrics contributing to SSUMY's Value grade of A and HON's Value grade of D.
SSUMY 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 SSUMY is likely the superior value option right now.
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Sumitomo Corp. (SSUMY): Free Stock Analysis Report Honeywell International Inc. (HON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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