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Investors interested in stocks from the Chemical - Specialty sector have probably already heard of Ashland (ASH) and Novozymes A/S (NVZMY). 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 Ashland and Novozymes A/S are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ASH currently has a forward P/E ratio of 21.12, while NVZMY has a forward P/E of 33.83. We also note that ASH has a PEG ratio of 0.93. 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. NVZMY currently has a PEG ratio of 3.47.
Another notable valuation metric for ASH is its P/B ratio of 1.54. 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, NVZMY has a P/B of 13.80.
These metrics, and several others, help ASH earn a Value grade of B, while NVZMY has been given a Value grade of F.
Both ASH and NVZMY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ASH is the superior value option right now.
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Ashland Inc. (ASH) : Free Stock Analysis Report
Novozymes A/S (NVZMY) : Free Stock Analysis Report