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Investors looking for stocks in the Industrial Services sector might want to consider either ScanSource (SCSC) or 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, ScanSource is sporting a Zacks Rank of #1 (Strong Buy), while W.W. Grainger has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SCSC has an improving earnings outlook. 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.
SCSC currently has a forward P/E ratio of 13.61, while GWW has a forward P/E of 27.45. We also note that SCSC has a PEG ratio of 1.36. 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 2.95.
Another notable valuation metric for SCSC is its P/B ratio of 1.25. 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 13.50.
These metrics, and several others, help SCSC earn a Value grade of A, while GWW has been given a Value grade of C.
SCSC has seen stronger estimate revision activity and sports more attractive valuation metrics than GWW, so it seems like value investors will conclude that SCSC is the superior option right now.
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ScanSource, Inc. (SCSC) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report