Investors looking for stocks in the Manufacturing – Electronics sector might want to consider either EnerSys (ENS) or Eaton (ETN). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
EnerSys has a Zacks Rank of #2 (Buy), while Eaton has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ENS 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.
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.
ENS currently has a forward P/E ratio of 16.66, while ETN has a forward P/E of 27.85. We also note that ENS has a PEG ratio of 1.11. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. ETN currently has a PEG ratio of 2.55.
Another notable valuation metric for ENS is its P/B ratio of 3.35. 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, ETN has a P/B of 7.46.
These metrics, and several others, help ENS earn a Value grade of B, while ETN has been given a Value grade of F.
ENS sticks out from ETN in both our Zacks Rank and Style Scores models, so value investors will likely feel that ENS is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Enersys (ENS) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).