Investors with an interest in Manufacturing - Farm Equipment stocks have likely encountered both Kubota Corp. (KUBTY) and Deere (DE). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Kubota Corp. has a Zacks Rank of #2 (Buy), while Deere has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KUBTY likely has seen a stronger improvement to its earnings outlook than DE has recently. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
KUBTY currently has a forward P/E ratio of 15.34, while DE has a forward P/E of 33.36. We also note that KUBTY has a PEG ratio of 2.04. 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. DE currently has a PEG ratio of 2.57.
Another notable valuation metric for KUBTY is its P/B ratio of 1.05. 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, DE has a P/B of 6.
Based on these metrics and many more, KUBTY holds a Value grade of B, while DE has a Value grade of D.
KUBTY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that KUBTY is likely the superior value option right now.
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