Investors with an interest in Building Products – Wood stocks have likely encountered both Norbord (OSB) and Weyerhaeuser (WY). But which of these two stocks presents investors with the better value opportunity right now? 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.
Norbord and Weyerhaeuser are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that OSB’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 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 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.
OSB currently has a forward P/E ratio of 6.50, while WY has a forward P/E of 21.93. We also note that OSB has a PEG ratio of 1.08. 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. WY currently has a PEG ratio of 4.39.
Another notable valuation metric for OSB is its P/B ratio of 2.66. 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, WY has a P/B of 2.79.
Based on these metrics and many more, OSB holds a Value grade of A, while WY has a Value grade of D.
OSB 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 OSB is likely the superior value option right now.
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