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Investors interested in stocks from the Industrial Services sector have probably already heard of ScanSource (SCSC) and W.W. Grainger (GWW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
ScanSource has a Zacks Rank of #1 (Strong Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SCSC likely has seen a stronger improvement to its earnings outlook than GWW has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
SCSC currently has a forward P/E ratio of 14.97, while GWW has a forward P/E of 29.51. We also note that SCSC has a PEG ratio of 1.50. 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. GWW currently has a PEG ratio of 3.17.
Another notable valuation metric for SCSC is its P/B ratio of 1.37. 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, GWW has a P/B of 14.51.
Based on these metrics and many more, SCSC holds a Value grade of A, while GWW has a Value grade of C.
SCSC 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 SCSC is likely the superior value option right now.
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ScanSource, Inc. (SCSC) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report