XYL vs. ZWS: Which Stock Is the Better Value Option?

Investors looking for stocks in the Waste Removal Services sector might want to consider either Xylem (XYL) or Zurn Water (ZWS). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, both Xylem and Zurn Water are sporting a Zacks Rank of #2 (Buy). 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. 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.

XYL currently has a forward P/E ratio of 17.97, while ZWS has a forward P/E of 26.24. We also note that XYL has a PEG ratio of 1.63. 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. ZWS currently has a PEG ratio of 1.75.

Another notable valuation metric for XYL is its P/B ratio of 2.28. 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, ZWS has a P/B of 4.77.

These metrics, and several others, help XYL earn a Value grade of B, while ZWS has been given a Value grade of C.

Both XYL and ZWS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that XYL 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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