Investors interested in Manufacturing - Tools & Related Products stocks are likely familiar with Core & Main (CNM) and Lincoln Electric Holdings (LECO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Core & Main and Lincoln Electric Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CNM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
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.
CNM currently has a forward P/E ratio of 14.35, while LECO has a forward P/E of 23.87. We also note that CNM has a PEG ratio of 1.52. 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. LECO currently has a PEG ratio of 1.59.
Another notable valuation metric for CNM is its P/B ratio of 4.13. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LECO has a P/B of 9.37.
Based on these metrics and many more, CNM holds a Value grade of B, while LECO has a Value grade of D.
CNM 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 CNM is likely the superior value option right now.
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Core & Main, Inc. (CNM): Free Stock Analysis Report
Lincoln Electric Holdings, Inc. (LECO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).