Investors looking for stocks in the Transportation - Equipment and Leasing sector might want to consider either AerCap (AER) or Westinghouse Air Brake Technologies (WAB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
AerCap has a Zacks Rank of #1 (Strong Buy), while Westinghouse Air Brake Technologies has 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 AER 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 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 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.
AER currently has a forward P/E ratio of 8.24, while WAB has a forward P/E of 26.79. We also note that AER has a PEG ratio of 0.62. 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. WAB currently has a PEG ratio of 1.97.
Another notable valuation metric for AER is its P/B ratio of 1.37. 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, WAB has a P/B of 4.37.
These metrics, and several others, help AER earn a Value grade of A, while WAB has been given a Value grade of D.
AER sticks out from WAB in both our Zacks Rank and Style Scores models, so value investors will likely feel that AER is the better option right now.
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Aercap Holdings N.V. (AER): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).