RBC Vs. EMR: Which Stock Should Value Investors Buy Now?

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.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, both Regal Beloit and Emerson Electric are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.

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.

RBC currently has a forward P/E ratio of 14.35, while EMR has a forward P/E of 18.16. We also note that RBC has a PEG ratio of 1.44. 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. EMR currently has a PEG ratio of 2.23.

Another notable valuation metric for RBC is its P/B ratio of 1.43. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, EMR has a P/B of 4.80.

Based on these metrics and many more, RBC holds a Value grade of A, while EMR has 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.