Investors looking for stocks in the Chemical - Diversified sector might want to consider either Innospec (IOSP) or Air Liquide (AIQUY). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, Innospec is sporting a Zacks Rank of #2 (Buy), while Air Liquide has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that IOSP has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
IOSP currently has a forward P/E ratio of 17.42, while AIQUY has a forward P/E of 28.17. We also note that IOSP has a PEG ratio of 2.32. 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. AIQUY currently has a PEG ratio of 2.77.
Another notable valuation metric for IOSP is its P/B ratio of 1.55. 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, AIQUY has a P/B of 4.21.
These metrics, and several others, help IOSP earn a Value grade of B, while AIQUY has been given a Value grade of F.
IOSP 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 IOSP is likely the superior value option right now.
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Innospec Inc. (IOSP): Free Stock Analysis Report
Air Liquide (AIQUY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).