FUL vs. PPG: Which Stock Is the Better Value Option?

Investors interested in stocks from the Chemical - Specialty sector have probably already heard of H. B. Fuller (FUL) and PPG Industries (PPG). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

H. B. Fuller and PPG Industries are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FUL is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

FUL currently has a forward P/E ratio of 11.93, while PPG has a forward P/E of 15.81. We also note that FUL has a PEG ratio of 0.63. 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. PPG currently has a PEG ratio of 1.83.

Another notable valuation metric for FUL is its P/B ratio of 1.5. 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, PPG has a P/B of 3.38.

These are just a few of the metrics contributing to FUL's Value grade of A and PPG's Value grade of C.

FUL 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 FUL is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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