Investors looking for stocks in the Building Products – Miscellaneous sector might want to consider either Arcosa (ACA) or Simpson Manufacturing (SSD). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.
Arcosa and Simpson Manufacturing are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ACA is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ACA currently has a forward P/E ratio of 15.23, while SSD has a forward P/E of 25.36. We also note that ACA has a PEG ratio of 1.25. 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. SSD currently has a PEG ratio of 5.07.
Another notable valuation metric for ACA is its P/B ratio of 0.95. 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, SSD has a P/B of 3.57.
Based on these metrics and many more, ACA holds a Value grade of A, while SSD has a Value grade of D.
ACA sticks out from SSD in both our Zacks Rank and Style Scores models, so value investors will likely feel that ACA is the better option right now.
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