Investors interested in Building Products - Miscellaneous stocks are likely familiar with Jacobs Solutions (J) and Advanced Drainage Systems (WMS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Jacobs Solutions and Advanced Drainage Systems are both sporting a Zacks Rank of #2 (Buy) right now. 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. But this is only part of the picture 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 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.
J currently has a forward P/E ratio of 20.88, while WMS has a forward P/E of 29.09. We also note that J has a PEG ratio of 1.54. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WMS currently has a PEG ratio of 2.26.
Another notable valuation metric for J is its P/B ratio of 5.07. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WMS has a P/B of 7.
These metrics, and several others, help J earn a Value grade of B, while WMS has been given a Value grade of D.
Both J and WMS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that J is the superior value option right now.
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Jacobs Solutions Inc. (J): Free Stock Analysis Report Advanced Drainage Systems, Inc. (WMS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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