Investors interested in stocks from the Electronics - Miscellaneous Products sector have probably already heard of Timken (TKR) and Rockwell Automation (ROK). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Timken and Rockwell Automation have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TKR currently has a forward P/E ratio of 20.29, while ROK has a forward P/E of 37.61. We also note that TKR has a PEG ratio of 1.74. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ROK currently has a PEG ratio of 3.26.
Another notable valuation metric for TKR is its P/B ratio of 2.48. 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, ROK has a P/B of 14.29.
These are just a few of the metrics contributing to TKR's Value grade of B and ROK's Value grade of F.
Both TKR and ROK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TKR is the superior value option right now.
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Timken Company (The) (TKR): Free Stock Analysis Report
Rockwell Automation, Inc. (ROK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).