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KOP vs. LIN: Which Stock Is the Better Value Option?

Zacks Equity Research
Ranger Energy Services, Inc. (RNGR) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Investors looking for stocks in the Chemical - Diversified sector might want to consider either Koppers (KOP) or Praxair (LIN). 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 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.

Right now, Koppers is sporting a Zacks Rank of #1 (Strong Buy), while Praxair has a Zacks Rank of #3 (Hold). This means that KOP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.

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.

KOP currently has a forward P/E ratio of 7.08, while LIN has a forward P/E of 24.03. We also note that KOP has a PEG ratio of 0.39. 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. LIN currently has a PEG ratio of 1.82.

Another notable valuation metric for KOP is its P/B ratio of 6. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LIN has a P/B of 7.14.

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

KOP 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 KOP is likely the superior value option right now.

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