Investors interested in Financial - Investment Management stocks are likely familiar with Franklin Resources (BEN) and T. Rowe Price (TROW). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Franklin Resources has a Zacks Rank of #1 (Strong Buy), while T. Rowe Price has a Zacks Rank of #3 (Hold) right now. This means that BEN'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 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 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.
BEN currently has a forward P/E ratio of 11.98, while TROW has a forward P/E of 11.99. We also note that BEN has a PEG ratio of 0.79. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TROW currently has a PEG ratio of 4.62.
Another notable valuation metric for BEN is its P/B ratio of 1.33. 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, TROW has a P/B of 2.32.
Based on these metrics and many more, BEN holds a Value grade of B, while TROW has a Value grade of C.
BEN has seen stronger estimate revision activity and sports more attractive valuation metrics than TROW, so it seems like value investors will conclude that BEN is the superior option right now.
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Franklin Resources, Inc. (BEN): Free Stock Analysis Report
T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).