Investors interested in Steel - Producers stocks are likely familiar with Ternium S.A. (TX) and Steel Dynamics (STLD). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Ternium S.A. is sporting a Zacks Rank of #1 (Strong Buy), while Steel Dynamics has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TX is likely seeing its earnings outlook improve to a greater extent. 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.
TX currently has a forward P/E ratio of 8.90, while STLD has a forward P/E of 13.49. We also note that TX has a PEG ratio of 0.17. 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. STLD currently has a PEG ratio of 0.44.
Another notable valuation metric for TX is its P/B ratio of 0.7. 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, STLD has a P/B of 3.71.
Based on these metrics and many more, TX holds a Value grade of A, while STLD has a Value grade of C.
TX sticks out from STLD in both our Zacks Rank and Style Scores models, so value investors will likely feel that TX is the better option right now.
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Ternium S.A. (TX): Free Stock Analysis Report
Steel Dynamics, Inc. (STLD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).