Investors interested in stocks from the Transportation - Equipment and Leasing sector have probably already heard of AerCap (AER) and Westinghouse Air Brake Technologies (WAB). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
AerCap has a Zacks Rank of #2 (Buy), while Westinghouse Air Brake Technologies 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 AER is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
AER currently has a forward P/E ratio of 8.56, while WAB has a forward P/E of 25.28. We also note that AER has a PEG ratio of 1.03. 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 1.92.
Another notable valuation metric for AER is its P/B ratio of 1.34. 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 4.08.
Based on these metrics and many more, AER holds a Value grade of A, while WAB has 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
Wabtec (WAB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).