Investors interested in stocks from the Chemical – Specialty sector have probably already heard of Israel Chemicals (ICL) and H. B. Fuller (FUL). 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Israel Chemicals and H. B. Fuller are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ICL has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ICL currently has a forward P/E ratio of 11.74, while FUL has a forward P/E of 15.03. We also note that ICL has a PEG ratio of 1.24. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. FUL currently has a PEG ratio of 1.30.
Another notable valuation metric for ICL is its P/B ratio of 1.59. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. For comparison, FUL has a P/B of 2.
These are just a few of the metrics contributing to ICL’s Value grade of A and FUL’s Value grade of C.
ICL 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 ICL is likely the superior value option right now.
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