Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Regal Beloit (RBC) or ABB (ABB). 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.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Regal Beloit is sporting a Zacks Rank of #2 (Buy), while ABB has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that RBC has an improving earnings outlook. However, value investors will care about much more than just this.
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 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.
RBC currently has a forward P/E ratio of 21.10, while ABB has a forward P/E of 33.30. We also note that RBC has a PEG ratio of 2.11. 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. ABB currently has a PEG ratio of 5.37.
Another notable valuation metric for RBC is its P/B ratio of 1.94. 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, ABB has a P/B of 3.42.
Based on these metrics and many more, RBC holds a Value grade of B, while ABB has a Value grade of C.
RBC 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 RBC is likely the superior value option right now.
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