Investors with an interest in Chemical - Diversified stocks have likely encountered both LyondellBasell (LYB) and Albemarle (ALB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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, LyondellBasell is sporting a Zacks Rank of #1 (Strong Buy), while Albemarle has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LYB is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
LYB currently has a forward P/E ratio of 8.19, while ALB has a forward P/E of 22.74. We also note that LYB has a PEG ratio of 0.17. 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. ALB currently has a PEG ratio of 1.42.
Another notable valuation metric for LYB is its P/B ratio of 2.3. 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, ALB has a P/B of 2.97.
Based on these metrics and many more, LYB holds a Value grade of B, while ALB has a Value grade of D.
LYB sticks out from ALB in both our Zacks Rank and Style Scores models, so value investors will likely feel that LYB is the better option right now.
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LyondellBasell Industries N.V. (LYB): Free Stock Analysis Report
Albemarle Corporation (ALB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).