HTO or CWST: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Waste Removal Services sector have probably already heard of H20 (HTO) and Casella (CWST). 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 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.

H20 and Casella are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that HTO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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 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.

HTO currently has a forward P/E ratio of 17.81, while CWST has a forward P/E of 110.97. We also note that HTO has a PEG ratio of 4.11. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CWST currently has a PEG ratio of 4.31.

Another notable valuation metric for HTO is its P/B ratio of 1.3. 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, CWST has a P/B of 4.83.

These metrics, and several others, help HTO earn a Value grade of B, while CWST has been given a Value grade of D.

HTO has seen stronger estimate revision activity and sports more attractive valuation metrics than CWST, so it seems like value investors will conclude that HTO is the superior option right now.

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

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