Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either EnerSys (ENS) or Zurn Water (ZWS). 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.
Right now, EnerSys is sporting a Zacks Rank of #1 (Strong Buy), while Zurn Water 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 ENS has an improving earnings outlook. 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.
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.
ENS currently has a forward P/E ratio of 10.20, while ZWS has a forward P/E of 26. We also note that ENS has a PEG ratio of 0.57. 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. ZWS currently has a PEG ratio of 2.
Another notable valuation metric for ENS is its P/B ratio of 2.20. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ZWS has a P/B of 3.78.
These metrics, and several others, help ENS earn a Value grade of A, while ZWS has been given a Value grade of C.
ENS sticks out from ZWS in both our Zacks Rank and Style Scores models, so value investors will likely feel that ENS is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
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