Investors with an interest in Soap and Cleaning Materials stocks have likely encountered both Unilever PLC (UL) and Clorox (CLX). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Unilever PLC has a Zacks Rank of #2 (Buy), while Clorox has a Zacks Rank of #3 (Hold). This means that UL'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 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.
UL currently has a forward P/E ratio of 21.91, while CLX has a forward P/E of 24.82. We also note that UL has a PEG ratio of 3.41. 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. CLX currently has a PEG ratio of 4.54.
Another notable valuation metric for UL is its P/B ratio of 5.04. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CLX has a P/B of 25.46.
These metrics, and several others, help UL earn a Value grade of A, while CLX has been given a Value grade of C.
UL sticks out from CLX in both our Zacks Rank and Style Scores models, so value investors will likely feel that UL is the better 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
Unilever PLC (UL) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
To read this article on Zacks.com click here.