Investors looking for stocks in the Manufacturing - Tools & Related Products sector might want to consider either Kennametal (KMT) or Lincoln Electric Holdings (LECO). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Kennametal has a Zacks Rank of #1 (Strong Buy), while Lincoln Electric Holdings has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KMT likely has seen a stronger improvement to its earnings outlook than LECO has recently. However, value investors will care about much more than just this.
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.
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.
KMT currently has a forward P/E ratio of 18.01, while LECO has a forward P/E of 26.55. We also note that KMT has a PEG ratio of 0.68. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LECO currently has a PEG ratio of 1.77.
Another notable valuation metric for KMT is its P/B ratio of 2.25. 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, LECO has a P/B of 10.67.
Based on these metrics and many more, KMT holds a Value grade of B, while LECO has a Value grade of D.
KMT sticks out from LECO in both our Zacks Rank and Style Scores models, so value investors will likely feel that KMT is the better option right now.
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Kennametal Inc. (KMT): Free Stock Analysis Report Lincoln Electric Holdings, Inc. (LECO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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