Investors looking for stocks in the Diversified Operations sector might want to consider either Crane (CR) or Federal Signal (FSS). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Crane has a Zacks Rank of #2 (Buy), while Federal Signal has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that CR likely has seen a stronger improvement to its earnings outlook than FSS has recently. 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.
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.
CR currently has a forward P/E ratio of 15.02, while FSS has a forward P/E of 23.95. We also note that CR has a PEG ratio of 0.75. 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. FSS currently has a PEG ratio of 1.60.
Another notable valuation metric for CR is its P/B ratio of 3.13. 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, FSS has a P/B of 3.38.
These are just a few of the metrics contributing to CR’s Value grade of B and FSS’s Value grade of C.
CR 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 CR is likely the superior value option right now.
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