Investors looking for stocks in the Paper and Related Products sector might want to consider either Suzano S.A. Sponsored ADR (SUZ) or Klabin SA (KLBAY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Suzano S.A. Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Klabin SA has a Zacks Rank of #3 (Hold). This means that SUZ'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 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.
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.
SUZ currently has a forward P/E ratio of 5.17, while KLBAY has a forward P/E of 29.55. We also note that SUZ has a PEG ratio of 0.12. 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. KLBAY currently has a PEG ratio of 1.90.
Another notable valuation metric for SUZ is its P/B ratio of 1.1. 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, KLBAY has a P/B of 6.86.
Based on these metrics and many more, SUZ holds a Value grade of A, while KLBAY has a Value grade of C.
SUZ stands above KLBAY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SUZ is the superior value option right now.
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Suzano S.A. Sponsored ADR (SUZ): Free Stock Analysis Report
Klabin SA (KLBAY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).