Investors interested in stocks from the Electronics - Miscellaneous Products sector have probably already heard of Timken (TKR) and Garmin (GRMN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Timken is sporting a Zacks Rank of #2 (Buy), while Garmin 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 TKR is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
TKR currently has a forward P/E ratio of 20.80, while GRMN has a forward P/E of 25.02. We also note that TKR has a PEG ratio of 1.53. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GRMN currently has a PEG ratio of 2.82.
Another notable valuation metric for TKR is its P/B ratio of 2.64. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, GRMN has a P/B of 4.96.
These metrics, and several others, help TKR earn a Value grade of B, while GRMN has been given a Value grade of D.
TKR stands above GRMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TKR is the superior value option right now.
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Timken Company (The) (TKR): Free Stock Analysis Report
Garmin Ltd. (GRMN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).