Investors interested in Industrial Services stocks are likely familiar with LegalZoom (LZ) and W.W. Grainger (GWW). But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Both LegalZoom and W.W. Grainger have a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
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.
LZ currently has a forward P/E ratio of 9.31, while GWW has a forward P/E of 30.14. We also note that LZ has a PEG ratio of 0.52. 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. GWW currently has a PEG ratio of 2.53.
Another notable valuation metric for LZ is its P/B ratio of 8.28. 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, GWW has a P/B of 14.93.
Based on these metrics and many more, LZ holds a Value grade of A, while GWW has a Value grade of D.
Both LZ and GWW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LZ is the superior value option right now.
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LegalZoom.com, Inc. (LZ): Free Stock Analysis Report
W.W. Grainger, Inc. (GWW): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).