Investors interested in Electronics - Miscellaneous Products stocks are likely familiar with Kimball Electronics (KE) and Rockwell Automation (ROK). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Kimball Electronics and Rockwell Automation are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that KE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
KE currently has a forward P/E ratio of 18.63, while ROK has a forward P/E of 33.56. We also note that KE has a PEG ratio of 0.93. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ROK currently has a PEG ratio of 2.59.
Another notable valuation metric for KE is its P/B ratio of 1.09. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ROK has a P/B of 14.01.
These metrics, and several others, help KE earn a Value grade of A, while ROK has been given a Value grade of D.
KE has seen stronger estimate revision activity and sports more attractive valuation metrics than ROK, so it seems like value investors will conclude that KE is the superior option right now.
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