Investors looking for stocks in the Chemical – Diversified sector might want to consider either Eastman Chemical (EMN) or PPG Industries (PPG). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Eastman Chemical has a Zacks Rank of #2 (Buy), while PPG Industries has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that EMN likely has seen a stronger improvement to its earnings outlook than PPG 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.
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.
EMN currently has a forward P/E ratio of 11.61, while PPG has a forward P/E of 16.15. We also note that EMN has a PEG ratio of 1.24. 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. PPG currently has a PEG ratio of 1.80.
Another notable valuation metric for EMN is its P/B ratio of 2.52. 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, PPG has a P/B of 4.69.
These metrics, and several others, help EMN earn a Value grade of B, while PPG has been given a Value grade of C.
EMN has seen stronger estimate revision activity and sports more attractive valuation metrics than PPG, so it seems like value investors will conclude that EMN is the superior option right now.
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