Which stock offers the better value option?

Investors interested in stocks in the Metal Products – Sourcing & Manufacturing space have likely come across both AB SKF (SKFRY) and Esab (ESAB). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.

We have found that the best way to discover great value opportunities is to combine a strong Zacks Rank with an outstanding grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, AB SKF has a Zacks Rank of #1 (Strong Buy), while Esab has a Zacks Rank of #3 (Hold). This system places emphasis on companies that have seen positive earnings estimate revisions, so investors should feel confident that SKFRY’s earnings outlook is likely to improve on a larger scale. However, this is only one factor of interest to value investors.

Value investors analyze a variety of traditional and proven metrics to find companies that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies using a number of key metrics, including the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other fundamentals that help us determine a company’s fair value.

SKFRY currently has a forward P/E ratio of 12.71, while ESAB has a forward P/E ratio of 19.50. We also note that SKFRY has a PEG ratio of 0.89. This popular number is similar to the widely used P/E ratio, but the PEG ratio also takes into account a company’s expected EPS growth rate. ESAB currently has a PEG ratio of 1.66.

Another important valuation metric for SKFRY is its P/B ratio of 1.69. Investors use the P/B ratio to compare the market value of a stock to its book value, which is defined as total assets minus total liabilities. For comparison, ESAB has a P/B ratio of 3.44.

These and several other metrics help SKFRY to achieve a B rating, while ESAB receives a C rating.

SKFRY is valued above ESAB thanks to its solid earnings outlook, and based on these valuation numbers, we also believe SKFRY is the better value option currently.

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AB SKF (SKFRY): Free Stock Analysis Report

ESAB Corporation (ESAB): Free Stock Analysis Report

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