ABM or CTAS: Which Is the Better Value Stock Right Now?

Investors interested in Business - Services stocks are likely familiar with ABM Industries (ABM) and Cintas (CTAS). 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.

Currently, both ABM Industries and Cintas are holding a Zacks Rank of # 2 (Buy). 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 only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

ABM currently has a forward P/E ratio of 13.58, while CTAS has a forward P/E of 50.75. We also note that ABM has a PEG ratio of 2.63. 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. CTAS currently has a PEG ratio of 3.85.

Another notable valuation metric for ABM is its P/B ratio of 1.79. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CTAS has a P/B of 19.53.

These are just a few of the metrics contributing to ABM's Value grade of B and CTAS's Value grade of D.

Both ABM and CTAS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ABM is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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