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Investors interested in stocks from the Industrial Services sector have probably already heard of Siemens AG (SIEGY) and W.W. Grainger (GWW). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Siemens AG is sporting a Zacks Rank of #2 (Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). This means that SIEGY'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.
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.
SIEGY currently has a forward P/E ratio of 21.30, while GWW has a forward P/E of 26.46. We also note that SIEGY has a PEG ratio of 2.28. 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. GWW currently has a PEG ratio of 2.80.
Another notable valuation metric for SIEGY is its P/B ratio of 2.90. 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, GWW has a P/B of 13.32.
Based on these metrics and many more, SIEGY holds a Value grade of B, while GWW has a Value grade of D.
SIEGY sticks out from GWW in both our Zacks Rank and Style Scores models, so value investors will likely feel that SIEGY is the better option right now.
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Siemens AG (SIEGY) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).