Investors interested in Security and Safety Services stocks are likely familiar with Alarm.com Holdings (ALRM) and Allegion (ALLE). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Alarm.com Holdings has a Zacks Rank of #1 (Strong Buy), while Allegion has a Zacks Rank of #3 (Hold). This means that ALRM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
ALRM currently has a forward P/E ratio of 16.28, while ALLE has a forward P/E of 18.15. We also note that ALRM has a PEG ratio of 1.28. 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. ALLE currently has a PEG ratio of 3.44.
Another notable valuation metric for ALRM is its P/B ratio of 2.67. 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, ALLE has a P/B of 6.61.
Based on these metrics and many more, ALRM holds a Value grade of B, while ALLE has a Value grade of C.
ALRM has seen stronger estimate revision activity and sports more attractive valuation metrics than ALLE, so it seems like value investors will conclude that ALRM is the superior option right now.
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Alarm.com Holdings, Inc. (ALRM): Free Stock Analysis Report Allegion PLC (ALLE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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