MEG or WM: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Waste Removal Services sector might want to consider either Montrose Environmental (MEG) or Waste Management (WM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Montrose Environmental is sporting a Zacks Rank of #2 (Buy), while Waste Management has a Zacks Rank of #3 (Hold). This means that MEG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

MEG currently has a forward P/E ratio of 17.04, while WM has a forward P/E of 26.06. We also note that MEG has a PEG ratio of 0.89. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WM currently has a PEG ratio of 2.42.

Another notable valuation metric for MEG is its P/B ratio of 1.94. 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, WM has a P/B of 9.14.

These are just a few of the metrics contributing to MEG's Value grade of B and WM's Value grade of C.

MEG has seen stronger estimate revision activity and sports more attractive valuation metrics than WM, so it seems like value investors will conclude that MEG is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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