Investors interested in Chemical - Specialty stocks are likely familiar with H. B. Fuller (FUL) and Novozymes A/S (NVZMY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
H. B. Fuller and Novozymes A/S are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FUL is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FUL currently has a forward P/E ratio of 11.50, while NVZMY has a forward P/E of 26.53. We also note that FUL has a PEG ratio of 0.61. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NVZMY currently has a PEG ratio of 3.02.
Another notable valuation metric for FUL is its P/B ratio of 1.45. 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, NVZMY has a P/B of 2.09.
These metrics, and several others, help FUL earn a Value grade of A, while NVZMY has been given a Value grade of D.
FUL 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 FUL is likely the superior value option right now.
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H. B. Fuller Company (FUL): Free Stock Analysis Report
Novozymes A/S (NVZMY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).