Investors looking for stocks in the Transportation - Equipment and Leasing sector might want to consider either AerCap (AER) or Herc Holdings (HRI). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, AerCap has a Zacks Rank of #2 (Buy), while Herc Holdings has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AER is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
AER currently has a forward P/E ratio of 8.90, while HRI has a forward P/E of 32.20. We also note that AER has a PEG ratio of 1.21. 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. HRI currently has a PEG ratio of 30.96.
Another notable valuation metric for AER is its P/B ratio of 1.25. 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, HRI has a P/B of 2.29.
These metrics, and several others, help AER earn a Value grade of A, while HRI has been given a Value grade of C.
AER sticks out from HRI in both our Zacks Rank and Style Scores models, so value investors will likely feel that AER is the better option right now.
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Aercap Holdings N.V. (AER): Free Stock Analysis Report
Herc Holdings Inc. (HRI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).