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JCI vs. ALLE: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in stocks from the Security and Safety Services sector have probably already heard of Johnson Controls (JCI) and Allegion (ALLE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Johnson Controls is sporting a Zacks Rank of #2 (Buy), while Allegion has a Zacks Rank of #3 (Hold). This means that JCI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

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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.

JCI currently has a forward P/E ratio of 20.73, while ALLE has a forward P/E of 20.90. We also note that JCI has a PEG ratio of 1.88. 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. ALLE currently has a PEG ratio of 1.90.

Another notable valuation metric for JCI is its P/B ratio of 1.70. 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, ALLE has a P/B of 14.92.

These metrics, and several others, help JCI earn a Value grade of A, while ALLE has been given a Value grade of D.

JCI 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 JCI is likely the superior value option right now.


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Johnson Controls International plc (JCI) : Free Stock Analysis Report
 
Allegion PLC (ALLE) : Free Stock Analysis Report
 
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