Investors interested in stocks from the Electronics - Miscellaneous Products sector have probably already heard of Kimball Electronics (KE) and Rockwell Automation (ROK). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Right now, Kimball Electronics is sporting a Zacks Rank of #1 (Strong Buy), while Rockwell Automation has a Zacks Rank of #2 (Buy). This means that KE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
KE currently has a forward P/E ratio of 17.83, while ROK has a forward P/E of 37.18. We also note that KE has a PEG ratio of 0.89. 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. ROK currently has a PEG ratio of 3.09.
Another notable valuation metric for KE is its P/B ratio of 1.07. 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, ROK has a P/B of 15.02.
These are just a few of the metrics contributing to KE's Value grade of A and ROK's Value grade of D.
KE sticks out from ROK in both our Zacks Rank and Style Scores models, so value investors will likely feel that KE is the better option right now.
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Kimball Electronics, Inc. (KE): Free Stock Analysis Report
Rockwell Automation, Inc. (ROK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).