Investors interested in Manufacturing - Electronics stocks are likely familiar with Vestas Wind Systems AS (VWDRY) and Eaton (ETN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Vestas Wind Systems AS and Eaton are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that VWDRY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
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.
VWDRY currently has a forward P/E ratio of 20.41, while ETN has a forward P/E of 30.34. We also note that VWDRY has a PEG ratio of 0.80. 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. ETN currently has a PEG ratio of 2.60.
Another notable valuation metric for VWDRY is its P/B ratio of 7.28. 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, ETN has a P/B of 7.86.
Based on these metrics and many more, VWDRY holds a Value grade of B, while ETN has a Value grade of F.
VWDRY 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 VWDRY is likely the superior value option right now.
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Vestas Wind Systems AS (VWDRY): Free Stock Analysis Report
Eaton Corporation, PLC (ETN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).