Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Jacobs Solutions (J) or Advanced Drainage Systems (WMS). But which of these two stocks presents investors with the better value opportunity right now? Let's 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, both Jacobs Solutions and Advanced Drainage Systems are holding a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
J currently has a forward P/E ratio of 18.07, while WMS has a forward P/E of 23.02. We also note that J has a PEG ratio of 1.33. 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. WMS currently has a PEG ratio of 1.65.
Another notable valuation metric for J is its P/B ratio of 4.39. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WMS has a P/B of 5.6.
Based on these metrics and many more, J holds a Value grade of B, while WMS has a Value grade of C.
Both J and WMS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that J is the superior value option right now.
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Jacobs Solutions Inc. (J): Free Stock Analysis Report
Advanced Drainage Systems, Inc. (WMS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).