Advertisement
UK markets closed
  • FTSE 100

    8,146.86
    -16.81 (-0.21%)
     
  • FTSE 250

    20,120.36
    -75.59 (-0.37%)
     
  • AIM

    776.04
    -4.39 (-0.56%)
     
  • GBP/EUR

    1.1845
    -0.0034 (-0.29%)
     
  • GBP/USD

    1.2686
    -0.0074 (-0.58%)
     
  • Bitcoin GBP

    52,245.65
    -68.53 (-0.13%)
     
  • CMC Crypto 200

    1,374.27
    -43.60 (-3.08%)
     
  • S&P 500

    5,431.60
    -2.14 (-0.04%)
     
  • DOW

    38,589.16
    -57.94 (-0.15%)
     
  • CRUDE OIL

    78.49
    -0.13 (-0.17%)
     
  • GOLD FUTURES

    2,348.40
    +30.40 (+1.31%)
     
  • NIKKEI 225

    38,814.56
    +94.09 (+0.24%)
     
  • HANG SENG

    17,941.78
    -170.85 (-0.94%)
     
  • DAX

    18,002.02
    -263.66 (-1.44%)
     
  • CAC 40

    7,503.27
    -204.75 (-2.66%)
     

GEO vs. RTO: Which Stock Is the Better Value Option?

Investors looking for stocks in the Business - Services sector might want to consider either Geo Group (GEO) or Rentokil Initial PLC (RTO). 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.

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.

Geo Group has a Zacks Rank of #1 (Strong Buy), while Rentokil Initial PLC has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that GEO likely has seen a stronger improvement to its earnings outlook than RTO has recently. But this is just one factor that value investors are interested in.

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.

ADVERTISEMENT

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.

GEO currently has a forward P/E ratio of 13.46, while RTO has a forward P/E of 18.01. We also note that GEO has a PEG ratio of 1.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RTO currently has a PEG ratio of 2.32.

Another notable valuation metric for GEO is its P/B ratio of 1.32. 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, RTO has a P/B of 2.71.

These metrics, and several others, help GEO earn a Value grade of A, while RTO has been given a Value grade of C.

GEO has seen stronger estimate revision activity and sports more attractive valuation metrics than RTO, so it seems like value investors will conclude that GEO is the superior 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

Geo Group Inc (The) (GEO) : Free Stock Analysis Report

Rentokil Initial PLC (RTO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research