Investors looking for stocks in the Security and Safety Services sector might want to consider either Alarm.com Holdings (ALRM) or Assa Abloy AB (ASAZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Alarm.com Holdings has a Zacks Rank of #2 (Buy), while Assa Abloy AB has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that ALRM likely has seen a stronger improvement to its earnings outlook than ASAZY has recently. But this is just one piece of the puzzle 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.
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.
ALRM currently has a forward P/E ratio of 20.44, while ASAZY has a forward P/E of 22.95. We also note that ALRM has a PEG ratio of 1.60. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ASAZY currently has a PEG ratio of 2.25.
Another notable valuation metric for ALRM is its P/B ratio of 3.29. 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, ASAZY has a P/B of 3.61.
Based on these metrics and many more, ALRM holds a Value grade of B, while ASAZY has a Value grade of C.
ALRM sticks out from ASAZY in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALRM is the better option right now.
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