Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Owens Corning (OC) or Armstrong World Industries (AWI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Owens Corning has a Zacks Rank of #2 (Buy), while Armstrong World Industries has a Zacks Rank of #3 (Hold) right now. This means that OC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
OC currently has a forward P/E ratio of 6.80, while AWI has a forward P/E of 16.46. We also note that OC has a PEG ratio of 0.72. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AWI currently has a PEG ratio of 1.37.
Another notable valuation metric for OC is its P/B ratio of 1.79. 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, AWI has a P/B of 7.45.
These are just a few of the metrics contributing to OC's Value grade of A and AWI's Value grade of C.
OC stands above AWI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that OC is the superior value option right now.
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