Investors interested in stocks from the Automotive - Replacement Parts sector have probably already heard of Douglas Dynamics (PLOW) and Knorr-Bremse - Unsponsored ADR (KNRRY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Douglas Dynamics has a Zacks Rank of #1 (Strong Buy), while Knorr-Bremse - Unsponsored ADR has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PLOW has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
PLOW currently has a forward P/E ratio of 16.13, while KNRRY has a forward P/E of 26.56. We also note that PLOW has a PEG ratio of 0.90. 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. KNRRY currently has a PEG ratio of 1.07.
Another notable valuation metric for PLOW is its P/B ratio of 3.9. 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, KNRRY has a P/B of 4.9.
Based on these metrics and many more, PLOW holds a Value grade of B, while KNRRY has a Value grade of C.
PLOW has seen stronger estimate revision activity and sports more attractive valuation metrics than KNRRY, so it seems like value investors will conclude that PLOW is the superior option right now.
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Douglas Dynamics, Inc. (PLOW): Free Stock Analysis Report
Knorr-Bremse - Unsponsored ADR (KNRRY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).