Investors interested in Business - Services stocks are likely familiar with Thomson Reuters (TRI) and UL Solutions Inc. (ULS). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Thomson Reuters has a Zacks Rank of #2 (Buy), while UL Solutions Inc. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TRI likely has seen a stronger improvement to its earnings outlook than ULS has recently. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TRI currently has a forward P/E ratio of 20.44, while ULS has a forward P/E of 41.18. We also note that TRI has a PEG ratio of 1.34. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ULS currently has a PEG ratio of 3.36.
Another notable valuation metric for TRI is its P/B ratio of 3.35. 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, ULS has a P/B of 14.01.
Based on these metrics and many more, TRI holds a Value grade of B, while ULS has a Value grade of D.
TRI has seen stronger estimate revision activity and sports more attractive valuation metrics than ULS, so it seems like value investors will conclude that TRI is the superior option right now.
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Thomson Reuters Corp (TRI): Free Stock Analysis Report
UL Solutions Inc. (ULS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).