AER or WAB: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Transportation - Equipment and Leasing sector might want to consider either AerCap (AER) or Westinghouse Air Brake Technologies (WAB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
AerCap and Westinghouse Air Brake Technologies are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that AER's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AER currently has a forward P/E ratio of 7.87, while WAB has a forward P/E of 26.45. We also note that AER has a PEG ratio of 0.59. 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. WAB currently has a PEG ratio of 1.94.
Another notable valuation metric for AER is its P/B ratio of 1.35. 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, WAB has a P/B of 4.33.
These metrics, and several others, help AER earn a Value grade of A, while WAB has been given a Value grade of F.
AER stands above WAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AER is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
