Investors with an interest in Transportation - Truck stocks have likely encountered both Werner Enterprises (WERN) and XPO (XPO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Werner Enterprises and XPO are both sporting 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 only part of the picture 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
WERN currently has a forward P/E ratio of 42.84, while XPO has a forward P/E of 43.58. We also note that WERN has a PEG ratio of 0.86. 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. XPO currently has a PEG ratio of 2.46.
Another notable valuation metric for WERN is its P/B ratio of 1.95. 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, XPO has a P/B of 13.58.
These metrics, and several others, help WERN earn a Value grade of B, while XPO has been given a Value grade of D.
Both WERN and XPO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WERN is the superior value option right now.
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Werner Enterprises, Inc. (WERN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).