Yahoo Finance EMR or AOS: Which Is the Better Value Stock Right Now?
Investors interested in Manufacturing - Electronics stocks are likely familiar with Emerson Electric (EMR) and A.O. Smith (AOS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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, both Emerson Electric and A.O. Smith are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
EMR currently has a forward P/E ratio of 19.78, while AOS has a forward P/E of 20.06. We also note that EMR has a PEG ratio of 2.17. 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. AOS currently has a PEG ratio of 2.23.
Another notable valuation metric for EMR is its P/B ratio of 2.72. 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, AOS has a P/B of 5.82.
Based on these metrics and many more, EMR holds a Value grade of B, while AOS has a Value grade of C.
Both EMR and AOS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EMR is the superior value option right now.
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Emerson Electric Co. (EMR) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
