RTO vs. ULS: Which Stock Should Value Investors Buy Now?

Investors with an interest in Business - Services stocks have likely encountered both Rentokil Initial PLC (RTO) and UL Solutions Inc. (ULS). 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Rentokil Initial PLC and UL Solutions Inc. are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.

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.

RTO currently has a forward P/E ratio of 22.85, while ULS has a forward P/E of 44.09. We also note that RTO has a PEG ratio of 1.90. 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. ULS currently has a PEG ratio of 3.60.

Another notable valuation metric for RTO is its P/B ratio of 2.8. 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, ULS has a P/B of 15.02.

Based on these metrics and many more, RTO holds a Value grade of B, while ULS has a Value grade of D.

Both RTO and ULS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RTO is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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