ARCB or XPO: Which Is the Better Value Stock Right Now?

Investors interested in Transportation - Truck stocks are likely familiar with ArcBest (ARCB) and XPO (XPO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, ArcBest is sporting a Zacks Rank of #2 (Buy), while XPO has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ARCB has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

ARCB currently has a forward P/E ratio of 23.78, while XPO has a forward P/E of 46.66. We also note that ARCB has a PEG ratio of 0.68. 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. XPO currently has a PEG ratio of 2.75.

Another notable valuation metric for ARCB is its P/B ratio of 2.18. 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, XPO has a P/B of 13.65.

These metrics, and several others, help ARCB earn a Value grade of B, while XPO has been given a Value grade of D.

ARCB is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ARCB is likely the superior value option right now.

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

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