Investors interested in stocks from the Leisure and Recreation Products sector have probably already heard of Brunswick (BC) and Pool Corp. (POOL). 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.
Currently, Brunswick has a Zacks Rank of #2 (Buy), while Pool Corp. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BC likely has seen a stronger improvement to its earnings outlook than POOL has recently. 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.
BC currently has a forward P/E ratio of 13.68, while POOL has a forward P/E of 32.78. We also note that BC has a PEG ratio of 1.37. 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. POOL currently has a PEG ratio of 1.39.
Another notable valuation metric for BC is its P/B ratio of 3.35. 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, POOL has a P/B of 20.40.
Based on these metrics and many more, BC holds a Value grade of B, while POOL has a Value grade of D.
BC has seen stronger estimate revision activity and sports more attractive valuation metrics than POOL, so it seems like value investors will conclude that BC is the superior option right now.
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