Investors with an interest in Building Products - Miscellaneous stocks have likely encountered both Jacobs Solutions (J) and Argan (AGX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Jacobs Solutions has a Zacks Rank of #2 (Buy), while Argan has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that J is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
J currently has a forward P/E ratio of 16.99, while AGX has a forward P/E of 25.18. We also note that J has a PEG ratio of 1.77. 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. AGX currently has a PEG ratio of 2.52.
Another notable valuation metric for J is its P/B ratio of 5.12. 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, AGX has a P/B of 9.57.
These are just a few of the metrics contributing to J's Value grade of B and AGX's Value grade of C.
J sticks out from AGX in both our Zacks Rank and Style Scores models, so value investors will likely feel that J is the better option right now.
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Jacobs Solutions Inc. (J) : Free Stock Analysis Report
Argan, Inc. (AGX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
