Investors with an interest in Financial - Investment Management stocks have likely encountered both Affiliated Managers Group (AMG) and Carlyle Group (CG). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Affiliated Managers Group has a Zacks Rank of #1 (Strong Buy), while Carlyle Group has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AMG is likely seeing its earnings outlook improve to a greater extent. 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.
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.
AMG currently has a forward P/E ratio of 8.24, while CG has a forward P/E of 12.11. We also note that AMG has a PEG ratio of 0.64. 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. CG currently has a PEG ratio of 1.06.
Another notable valuation metric for AMG is its P/B ratio of 1.33. 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, CG has a P/B of 2.78.
Based on these metrics and many more, AMG holds a Value grade of A, while CG has a Value grade of C.
AMG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AMG is likely the superior value option right now.
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Affiliated Managers Group, Inc. (AMG): Free Stock Analysis Report Carlyle Group Inc. (CG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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