Investors looking for stocks in the Electronics - Miscellaneous Products sector might want to consider either Flex (FLEX) or Madison Air Solutions Corporation (MAIR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, Flex has a Zacks Rank of #2 (Buy), while Madison Air Solutions Corporation has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FLEX has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
FLEX currently has a forward P/E ratio of 26.68, while MAIR has a forward P/E of 32.69. We also note that FLEX has a PEG ratio of 0.58. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MAIR currently has a PEG ratio of 1.86.
Another notable valuation metric for FLEX is its P/B ratio of 8.52. 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, MAIR has a P/B of 118.93.
These metrics, and several others, help FLEX earn a Value grade of B, while MAIR has been given a Value grade of D.
FLEX has seen stronger estimate revision activity and sports more attractive valuation metrics than MAIR, so it seems like value investors will conclude that FLEX is the superior option right now.
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Flex Ltd. (FLEX): Free Stock Analysis Report
Madison Air Solutions Corporation (MAIR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).