Investors interested in Financial - Investment Management stocks are likely familiar with Affiliated Managers Group (AMG) and BlackRock (BLK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Affiliated Managers Group and BlackRock are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AMG has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
AMG currently has a forward P/E ratio of 10.68, while BLK has a forward P/E of 20.00. We also note that AMG has a PEG ratio of 0.50. 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. BLK currently has a PEG ratio of 1.20.
Another notable valuation metric for AMG is its P/B ratio of 2.64. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BLK has a P/B of 3.08.
These are just a few of the metrics contributing to AMG's Value grade of B and BLK's Value grade of F.
AMG stands above BLK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AMG is the superior value option right now.
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Affiliated Managers Group, Inc. (AMG): Free Stock Analysis Report
BlackRock (BLK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).