Investors interested in Waste Removal Services stocks are likely familiar with Montrose Environmental (ONT) and Waste Management (WM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Montrose Environmental has a Zacks Rank of #2 (Buy), while Waste Management has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ONT likely has seen a stronger improvement to its earnings outlook than WM has recently. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ONT currently has a forward P/E ratio of 13.05, while WM has a forward P/E of 29.03. We also note that ONT has a PEG ratio of 0.69. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WM currently has a PEG ratio of 2.88.
Another notable valuation metric for ONT is its P/B ratio of 1.65. 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, WM has a P/B of 9.48.
These are just a few of the metrics contributing to ONT's Value grade of A and WM's Value grade of C.
ONT sticks out from WM in both our Zacks Rank and Style Scores models, so value investors will likely feel that ONT is the better option right now.
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Montrose Environmental Group, Inc. (ONT): Free Stock Analysis Report
Waste Management, Inc. (WM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).