Investors with an interest in Industrial Services stocks have likely encountered both LegalZoom (LZ) and Fastenal (FAST). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
LegalZoom and Fastenal are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LZ 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 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.
LZ currently has a forward P/E ratio of 8.37, while FAST has a forward P/E of 36.28. We also note that LZ has a PEG ratio of 0.49. 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. FAST currently has a PEG ratio of 2.85.
Another notable valuation metric for LZ is its P/B ratio of 6.48. 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, FAST has a P/B of 12.87.
Based on these metrics and many more, LZ holds a Value grade of A, while FAST has a Value grade of D.
LZ stands above FAST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LZ is the superior value option right now.
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LegalZoom.com, Inc. (LZ): Free Stock Analysis Report
Fastenal Company (FAST): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).