AXTA vs. HWKN: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Chemical - Specialty sector have probably already heard of Axalta Coating Systems (AXTA) and Hawkins (HWKN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Currently, Axalta Coating Systems has a Zacks Rank of #2 (Buy), while Hawkins has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AXTA is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

AXTA currently has a forward P/E ratio of 13.86, while HWKN has a forward P/E of 28.90. We also note that AXTA has a PEG ratio of 1.80. 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. HWKN currently has a PEG ratio of 2.41.

Another notable valuation metric for AXTA is its P/B ratio of 3.03. 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, HWKN has a P/B of 4.51.

Based on these metrics and many more, AXTA holds a Value grade of B, while HWKN has a Value grade of D.

AXTA sticks out from HWKN in both our Zacks Rank and Style Scores models, so value investors will likely feel that AXTA is the better option right now.

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

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