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Investors interested in Technology Services stocks are likely familiar with Climb Global Solutions (CLMB) and Veralto (VLTO). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Climb Global Solutions is sporting a Zacks Rank of #1 (Strong Buy), while Veralto has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CLMB is likely seeing its earnings outlook improve to a greater extent. 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.
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.
CLMB currently has a forward P/E ratio of 21, while VLTO has a forward P/E of 26.71. We also note that CLMB has a PEG ratio of 1.75. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. VLTO currently has a PEG ratio of 4.24.
Another notable valuation metric for CLMB is its P/B ratio of 5.77. 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, VLTO has a P/B of 11.90.
These metrics, and several others, help CLMB earn a Value grade of B, while VLTO has been given a Value grade of C.
CLMB sticks out from VLTO in both our Zacks Rank and Style Scores models, so value investors will likely feel that CLMB is the better option right now.
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Climb Global Solutions, Inc. (CLMB) : Free Stock Analysis Report
Veralto Corporation (VLTO) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).