Investors interested in stocks from the Transportation – Equipment and Leasing sector have probably already heard of AerCap (AER) and Westinghouse Air Brake Technologies (WAB). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Currently, AerCap has a Zacks Rank of #1 (Strong Buy), while Westinghouse Air Brake Technologies has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AER has an improving earnings outlook. But this is only part of the picture for value investors.
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 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.
AER currently has a forward P/E ratio of 7.73, while WAB has a forward P/E of 25.87. We also note that AER has a PEG ratio of 0.58. 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. WAB currently has a PEG ratio of 1.90.
Another notable valuation metric for AER is its P/B ratio of 1.33. 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, WAB has a P/B of 4.22.
Based on these metrics and many more, AER holds a Value grade of A, while WAB has a Value grade of D.
AER has seen stronger estimate revision activity and sports more attractive valuation metrics than WAB, so it seems like value investors will conclude that AER is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Aercap Holdings N.V. (AER) : Free Stock Analysis Report
Wabtec (WAB) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
