Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Jacobs Solutions (J) and Installed Building Products (IBP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Jacobs Solutions has a Zacks Rank of #2 (Buy), while Installed Building Products has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that J likely has seen a stronger improvement to its earnings outlook than IBP has recently. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
J currently has a forward P/E ratio of 17.66, while IBP has a forward P/E of 26.08. We also note that J has a PEG ratio of 1.30. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. IBP currently has a PEG ratio of 3.90.
Another notable valuation metric for J is its P/B ratio of 4.55. 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, IBP has a P/B of 11.44.
These metrics, and several others, help J earn a Value grade of B, while IBP has been given a Value grade of D.
J sticks out from IBP in both our Zacks Rank and Style Scores models, so value investors will likely feel that J is the better option right now.
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Jacobs Solutions Inc. (J): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).