Investors with an interest in Manufacturing - Electronics stocks have likely encountered both Vestas Wind Systems AS (VWDRY) and Eaton (ETN). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Vestas Wind Systems AS is sporting a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that VWDRY likely has seen a stronger improvement to its earnings outlook than ETN has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
VWDRY currently has a forward P/E ratio of 19.03, while ETN has a forward P/E of 26.04. We also note that VWDRY has a PEG ratio of 1.21. 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. ETN currently has a PEG ratio of 2.39.
Another notable valuation metric for VWDRY is its P/B ratio of 5.58. 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, ETN has a P/B of 6.94.
These are just a few of the metrics contributing to VWDRY's Value grade of B and ETN's Value grade of D.
VWDRY stands above ETN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VWDRY 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
Vestas Wind Systems AS (VWDRY): Free Stock Analysis Report Eaton Corporation, PLC (ETN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
