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Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of Williams (NYSE:WMB) Industrial Services (WLMS) and Armstrong World Industries (AWI). But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Currently, both Williams Industrial Services and Armstrong World Industries are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
WLMS currently has a forward P/E ratio of 4.26, while AWI has a forward P/E of 13.89. We also note that WLMS has a PEG ratio of 0.43. 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. AWI currently has a PEG ratio of 1.75.
Another notable valuation metric for WLMS is its P/B ratio of 1.04. 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, AWI has a P/B of 9.60.
These are just a few of the metrics contributing to WLMS's Value grade of B and AWI's Value grade of D.
Both WLMS and AWI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WLMS is the superior value option right now.
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