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 companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, AerCap is sporting a Zacks Rank of #2 (Buy), while Westinghouse Air Brake Technologies has a Zacks Rank of #3 (Hold). This means that AER's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.
AER currently has a forward P/E ratio of 8.24, while WAB has a forward P/E of 26.03. We also note that AER has a PEG ratio of 0.62. 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 1.60.
Another notable valuation metric for AER is its P/B ratio of 1.43. 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.
These are just a few of the metrics contributing to AER's Value grade of A and WAB's Value grade of D.
AER sticks out from WAB in both our Zacks Rank and Style Scores models, so value investors will likely feel that AER is the better option right now.
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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).
