Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of Tennant (TNC) and Ingersoll Rand (IR). 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.
Tennant has a Zacks Rank of #2 (Buy), while Ingersoll Rand has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TNC likely has seen a stronger improvement to its earnings outlook than IR has recently. But this is only part of the picture 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.
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.
TNC currently has a forward P/E ratio of 16.77, while IR has a forward P/E of 22.21. We also note that TNC has a PEG ratio of 2.40. 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. IR currently has a PEG ratio of 4.74.
Another notable valuation metric for TNC is its P/B ratio of 2.4. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, IR has a P/B of 2.96.
These metrics, and several others, help TNC earn a Value grade of B, while IR has been given a Value grade of D.
TNC sticks out from IR in both our Zacks Rank and Style Scores models, so value investors will likely feel that TNC is the better option right now.
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Tennant Company (TNC): Free Stock Analysis Report
Ingersoll Rand Inc. (IR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).