Investors looking for stocks in the Manufacturing - Tools & Related Products sector might want to consider either Stanley Black & Decker (SWK) or Lincoln Electric Holdings (LECO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Stanley Black & Decker and Lincoln Electric Holdings have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
SWK currently has a forward P/E ratio of 15.99, while LECO has a forward P/E of 23.16. We also note that SWK has a PEG ratio of 1.32. 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. LECO currently has a PEG ratio of 1.54.
Another notable valuation metric for SWK is its P/B ratio of 1.5. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LECO has a P/B of 9.08.
Based on these metrics and many more, SWK holds a Value grade of A, while LECO has a Value grade of C.
Both SWK and LECO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SWK is the superior value option right now.
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Stanley Black & Decker, Inc. (SWK): Free Stock Analysis Report
Lincoln Electric Holdings, Inc. (LECO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).