Investors looking for stocks in the Transportation - Services sector might want to consider either Hub Group (HUBG) or RXO (RXO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Hub Group and RXO are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that HUBG likely has seen a stronger improvement to its earnings outlook than RXO has recently. 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 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.
HUBG currently has a forward P/E ratio of 18.88, while RXO has a forward P/E of 388.06. We also note that HUBG has a PEG ratio of 1.18. 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. RXO currently has a PEG ratio of 25.87.
Another notable valuation metric for HUBG is its P/B ratio of 1.44. 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, RXO has a P/B of 2.66.
These metrics, and several others, help HUBG earn a Value grade of B, while RXO has been given a Value grade of D.
HUBG sticks out from RXO in both our Zacks Rank and Style Scores models, so value investors will likely feel that HUBG is the better option right now.
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Hub Group, Inc. (HUBG): Free Stock Analysis Report
RXO INC (RXO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).