Investors looking for stocks in the Manufacturing - Farm Equipment sector might want to consider either Alamo Group (ALG) or Deere (DE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Alamo Group and Deere 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 ALG has an improving earnings outlook. However, value investors will care about much more than just this.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ALG currently has a forward P/E ratio of 15.86, while DE has a forward P/E of 33.83. We also note that ALG has a PEG ratio of 0.99. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DE currently has a PEG ratio of 2.27.
Another notable valuation metric for ALG is its P/B ratio of 1.75. 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, DE has a P/B of 6.04.
Based on these metrics and many more, ALG holds a Value grade of B, while DE has a Value grade of D.
ALG sticks out from DE in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALG is the better option right now.
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Alamo Group, Inc. (ALG): Free Stock Analysis Report
Deere & Company (DE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).