MEG vs. WM: Which Stock Is the Better Value Option?

Investors interested in Waste Removal Services stocks are likely familiar with Montrose Environmental (MEG) and 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.

Currently, Montrose Environmental has 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 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.

MEG currently has a forward P/E ratio of 17.40, while WM has a forward P/E of 26.28. We also note that MEG has a PEG ratio of 0.91. 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. WM currently has a PEG ratio of 2.44.

Another notable valuation metric for MEG is its P/B ratio of 1.98. 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, WM has a P/B of 9.22.

These metrics, and several others, help MEG earn a Value grade of B, while WM has been given a Value grade of C.

MEG stands above WM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MEG is the superior value option right now.

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

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