Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Vestas Wind Systems AS (VWDRY) or Eaton (ETN). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Vestas Wind Systems AS has a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #3 (Hold). 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 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.
VWDRY currently has a forward P/E ratio of 19.60, while ETN has a forward P/E of 30.60. We also note that VWDRY has a PEG ratio of 1.31. 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 2.62.
Another notable valuation metric for VWDRY is its P/B ratio of 5.76. 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 8.01.
Based on these metrics and many more, VWDRY holds a Value grade of B, while ETN has a Value grade of D.
VWDRY stands above ETN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VWDRY is 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).