Investors interested in Transportation - Equipment and Leasing stocks are likely familiar with 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Herc Holdings and Westinghouse Air Brake Technologies have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HRI currently has a forward P/E ratio of 18.28, while WAB has a forward P/E of 25.15. We also note that HRI has a PEG ratio of 1.39. 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. WAB currently has a PEG ratio of 1.98.
Another notable valuation metric for HRI is its P/B ratio of 2.59. 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 3.97.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Herc Holdings Inc. (HRI): Free Stock Analysis Report Wabtec (WAB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
