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Investors interested in stocks from the Security and Safety Services sector have probably already heard of ADT (ADT) and Allegion (ALLE). 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.
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, both ADT and Allegion are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ADT currently has a forward P/E ratio of 6.58, while ALLE has a forward P/E of 22.31. We also note that ADT has a PEG ratio of 0.76. 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. ALLE currently has a PEG ratio of 1.93.
Another notable valuation metric for ADT is its P/B ratio of 1.11. 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, ALLE has a P/B of 15.92.
These are just a few of the metrics contributing to ADT's Value grade of A and ALLE's Value grade of D.
Both ADT and ALLE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ADT is the superior value option right now.
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