RDN vs. ALIZY: Which Stock Is the Better Value Option?

Investors interested in stocks from the Insurance - Multi line sector have probably already heard of Radian (RDN) and Allianz SE (ALIZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Right now, Radian is sporting a Zacks Rank of #2 (Buy), while Allianz SE has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that RDN likely has seen a stronger improvement to its earnings outlook than ALIZY has recently. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

RDN currently has a forward P/E ratio of 6.85, while ALIZY has a forward P/E of 13.48. We also note that RDN has a PEG ratio of 0.81. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ALIZY currently has a PEG ratio of 2.08.

Another notable valuation metric for RDN is its P/B ratio of 0.92. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ALIZY has a P/B of 2.33.

These metrics, and several others, help RDN earn a Value grade of A, while ALIZY has been given a Value grade of C.

RDN 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 RDN 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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