Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Affiliated Managers Group (AMG) and BlackRock (BLK). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Affiliated Managers Group and BlackRock are both sporting a Zacks Rank of #2 (Buy) right now. 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. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
AMG currently has a forward P/E ratio of 10.33, while BLK has a forward P/E of 21.10. We also note that AMG has a PEG ratio of 0.54. 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. BLK currently has a PEG ratio of 1.32.
Another notable valuation metric for AMG is its P/B ratio of 2.51. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, BLK has a P/B of 3.15.
Based on these metrics and many more, AMG holds a Value grade of B, while BLK has a Value grade of D.
Both AMG and BLK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AMG is the superior value 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
Affiliated Managers Group, Inc. (AMG) : Free Stock Analysis Report
BlackRock (BLK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
