Investors with an interest in Financial - Investment Management stocks have likely encountered both Ameriprise Financial Services (AMP) and Pershing Square (PS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Ameriprise Financial Services has a Zacks Rank of #2 (Buy), while Pershing Square 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 AMP has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
AMP currently has a forward P/E ratio of 12.21, while PS has a forward P/E of 65.50. We also note that AMP has a PEG ratio of 1.01. 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. PS currently has a PEG ratio of 3.75.
Another notable valuation metric for AMP is its P/B ratio of 7.98. 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, PS has a P/B of 10.51.
Based on these metrics and many more, AMP holds a Value grade of A, while PS has a Value grade of F.
AMP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AMP is likely the superior value option right now.
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Ameriprise Financial, Inc. (AMP): Free Stock Analysis Report
Pershing Square Inc. (PS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).