Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Quanex Building Products (NX) and Construction Partners (ROAD). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.
Right now, Quanex Building Products is sporting a Zacks Rank of #2 (Buy), while Construction Partners has a Zacks Rank of #4 (Sell). This means that NX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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 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.
NX currently has a forward P/E ratio of 10.95, while ROAD has a forward P/E of 35.86. We also note that NX has a PEG ratio of 0.78. 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. ROAD currently has a PEG ratio of 0.88.
Another notable valuation metric for NX is its P/B ratio of 1.15. 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, ROAD has a P/B of 6.03.
These metrics, and several others, help NX earn a Value grade of A, while ROAD has been given a Value grade of C.
NX stands above ROAD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NX is the superior value option right now.
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Quanex Building Products Corporation (NX): Free Stock Analysis Report
Construction Partners, Inc. (ROAD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).