Benzinga - by Zacks, Benzinga Contributor.
Investors with an interest in Diversified Operations stocks have likely encountered both Sumitomo Corp. (OTC: SSUMY) and ITT (NYSE: ITT). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Sumitomo Corp. and ITT are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
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.
SSUMY currently has a forward P/E ratio of 8.43, while ITT has a forward P/E of 22.21. We also note that SSUMY has a PEG ratio of 0.58. 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. ITT currently has a PEG ratio of 1.68.
Another notable valuation metric for SSUMY is its P/B ratio of 0.93. 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, ITT has a P/B of 4.13.
These are just a few of the metrics contributing to SSUMY's Value grade of A and ITT's Value grade of D.
Both SSUMY and ITT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SSUMY is the superior value option right now.
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