ROCK vs. ROAD: Which Stock Is the Better Value Option?

Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Gibraltar Industries (ROCK) and Construction Partners (ROAD). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Gibraltar Industries has a Zacks Rank of #2 (Buy), while Construction Partners has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ROCK is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ROCK currently has a forward P/E ratio of 12.36, while ROAD has a forward P/E of 34.18. We also note that ROCK has a PEG ratio of 0.82. 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. ROAD currently has a PEG ratio of 0.96.

Another notable valuation metric for ROCK is its P/B ratio of 1.58. 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, ROAD has a P/B of 5.59.

These are just a few of the metrics contributing to ROCK's Value grade of B and ROAD's Value grade of C.

ROCK sticks out from ROAD in both our Zacks Rank and Style Scores models, so value investors will likely feel that ROCK is the better option right now.

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

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