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Investors interested in Building Products - Concrete and Aggregates stocks are likely familiar with U.S. Concrete (USCR) and Eagle Materials (EXP). But which of these two companies is the best option for those looking for undervalued stocks? 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, U.S. Concrete has a Zacks Rank of #2 (Buy), while Eagle Materials has a Zacks Rank of #3 (Hold). This means that USCR's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
USCR currently has a forward P/E ratio of 14.91, while EXP has a forward P/E of 15.56. We also note that USCR has a PEG ratio of 1.49. 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. EXP currently has a PEG ratio of 1.56.
Another notable valuation metric for USCR is its P/B ratio of 2.39. 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, EXP has a P/B of 3.34.
These metrics, and several others, help USCR earn a Value grade of A, while EXP has been given a Value grade of C.
USCR 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 USCR is likely the superior value option right now.
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