Investors looking for stocks in the Insurance - Property and Casualty sector might want to consider either Essent Group (ESNT) or Berkshire Hathaway B (BRK.B). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Essent Group and Berkshire Hathaway B 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. 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.
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.
ESNT currently has a forward P/E ratio of 8.11, while BRK.B has a forward P/E of 23.71. We also note that ESNT has a PEG ratio of 1.55. 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. BRK.B currently has a PEG ratio of 1.98.
Another notable valuation metric for ESNT is its P/B ratio of 1. 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, BRK.B has a P/B of 1.48.
These metrics, and several others, help ESNT earn a Value grade of B, while BRK.B has been given a Value grade of D.
Both ESNT and BRK.B are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ESNT is the superior value option right now.
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Essent Group Ltd. (ESNT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).