Investors looking for stocks in the Chemical - Diversified sector might want to consider either Eastman Chemical (EMN) or Innospec (IOSP). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Eastman Chemical is sporting a Zacks Rank of #2 (Buy), while Innospec has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EMN is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
EMN currently has a forward P/E ratio of 10.56, while IOSP has a forward P/E of 17.05. We also note that EMN has a PEG ratio of 0.85. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. IOSP currently has a PEG ratio of 2.27.
Another notable valuation metric for EMN is its P/B ratio of 1.26. 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, IOSP has a P/B of 1.51.
These are just a few of the metrics contributing to EMN's Value grade of A and IOSP's Value grade of C.
EMN 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 EMN is likely the superior value option right now.
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Eastman Chemical Company (EMN): Free Stock Analysis Report
Innospec Inc. (IOSP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).