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Investors interested in stocks from the Building Products - Retail sector have probably already heard of Lumber Liquidators Holdings (LL) and Fastenal (FAST). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Lumber Liquidators Holdings is sporting a Zacks Rank of #2 (Buy), while Fastenal has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LL likely has seen a stronger improvement to its earnings outlook than FAST 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 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.
LL currently has a forward P/E ratio of 12.74, while FAST has a forward P/E of 24.40. We also note that LL has a PEG ratio of 0.46. 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. FAST currently has a PEG ratio of 1.74.
Another notable valuation metric for LL is its P/B ratio of 1.71. 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, FAST has a P/B of 7.58.
These are just a few of the metrics contributing to LL's Value grade of B and FAST's Value grade of D.
LL 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 LL is likely the superior value option right now.
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