Investors interested in stocks from the Manufacturing - General Industrial sector have probably already heard of Mueller Water Products (MWA) and Nordson (NDSN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Mueller Water Products has a Zacks Rank of #2 (Buy), while Nordson has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MWA has an improving earnings outlook. But this is only part of the picture for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
MWA currently has a forward P/E ratio of 16.73, while NDSN has a forward P/E of 26.76. We also note that MWA has a PEG ratio of 1.12. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NDSN currently has a PEG ratio of 2.06.
Another notable valuation metric for MWA is its P/B ratio of 3.56. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NDSN has a P/B of 5.39.
These metrics, and several others, help MWA earn a Value grade of B, while NDSN has been given a Value grade of D.
MWA 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 MWA is likely the superior value option right now.
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