Investors interested in stocks from the Manufacturing - Electronics sector have probably already heard of Regal Beloit (RBC) and Emerson Electric (NYSE:EMR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Regal Beloit and Emerson Electric are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
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.
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.
RBC currently has a forward P/E ratio of 14.81, while EMR has a forward P/E of 20.18. We also note that RBC has a PEG ratio of 1.48. 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. EMR currently has a PEG ratio of 2.51.
Another notable valuation metric for RBC is its P/B ratio of 1.48. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, EMR has a P/B of 5.34.
These metrics, and several others, help RBC earn a Value grade of A, while EMR has been given a Value grade of C.
Both RBC and EMR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RBC is the superior value option right now.
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