Investors interested in stocks from the Building Products - Wood sector have probably already heard of Universal Forest Products (UFPI) and Potlatch (PCH). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Universal Forest Products has a Zacks Rank of #2 (Buy), while Potlatch has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UFPI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
UFPI currently has a forward P/E ratio of 13.69, while PCH has a forward P/E of 45.27. We also note that UFPI has a PEG ratio of 2.74. 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. PCH currently has a PEG ratio of 9.05.
Another notable valuation metric for UFPI is its P/B ratio of 2.03. 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, PCH has a P/B of 2.07.
These are just a few of the metrics contributing to UFPI's Value grade of A and PCH's Value grade of D.
UFPI stands above PCH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UFPI is the superior value option right now.
Universal Forest Products, Inc. (UFPI): Free Stock Analysis Report
Potlatch Corporation (PCH): Free Stock Analysis Report
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