Investors interested in Building Products - Miscellaneous stocks are likely familiar with Owens Corning (OC) and Installed Building Products (IBP). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Owens Corning and Installed Building Products are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
OC currently has a forward P/E ratio of 13.51, while IBP has a forward P/E of 22.36. We also note that OC has a PEG ratio of 2.01. 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. IBP currently has a PEG ratio of 4.12.
Another notable valuation metric for OC is its P/B ratio of 2.82. 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, IBP has a P/B of 9.73.
Based on these metrics and many more, OC holds a Value grade of A, while IBP has a Value grade of C.
Both OC and IBP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that OC is the superior value option right now.
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Owens Corning Inc (OC): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).