Investors looking for stocks in the Steel - Producers sector might want to consider either Usinas Siderurgicas de Minas Gerais SA (USNZY) or Steel Dynamics (STLD). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Usinas Siderurgicas de Minas Gerais SA and Steel Dynamics are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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 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.
USNZY currently has a forward P/E ratio of 5.93, while STLD has a forward P/E of 14.63. We also note that USNZY has a PEG ratio of 0.14. 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. STLD currently has a PEG ratio of 0.48.
Another notable valuation metric for USNZY is its P/B ratio of 0.2. 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, STLD has a P/B of 3.94.
These are just a few of the metrics contributing to USNZY's Value grade of A and STLD's Value grade of C.
Both USNZY and STLD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that USNZY is the superior value option right now.
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Usinas Siderurgicas de Minas Gerais SA (USNZY): Free Stock Analysis Report
Steel Dynamics, Inc. (STLD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).