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Investors looking for stocks in the Electronics - Miscellaneous Products sector might want to consider either Flex (FLEX) or Rockwell Automation (ROK). 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 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.
Flex and Rockwell Automation are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FLEX has an improving earnings outlook. However, value investors will care about much more than just this.
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.
FLEX currently has a forward P/E ratio of 13.32, while ROK has a forward P/E of 27.53. We also note that FLEX has a PEG ratio of 1.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ROK currently has a PEG ratio of 3.
Another notable valuation metric for FLEX is its P/B ratio of 2.67. 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, ROK has a P/B of 8.21.
These are just a few of the metrics contributing to FLEX's Value grade of A and ROK's Value grade of D.
FLEX 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 FLEX is likely the superior value option right now.
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Flex Ltd. (FLEX) : Free Stock Analysis Report
Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).