Investors looking for stocks in the Transportation - Equipment and Leasing sector might want to consider either Greenbrier Companies (GBX) or Herc Holdings (HRI). 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.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Greenbrier Companies has a Zacks Rank of #1 (Strong Buy), while Herc Holdings has a Zacks Rank of #5 (Strong Sell) right now. This means that GBX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
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.
GBX currently has a forward P/E ratio of 11.36, while HRI has a forward P/E of 13.17. We also note that GBX has a PEG ratio of 0.97. 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. HRI currently has a PEG ratio of 1.03.
Another notable valuation metric for GBX is its P/B ratio of 1.33. 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, HRI has a P/B of 3.82.
Based on these metrics and many more, GBX holds a Value grade of B, while HRI has a Value grade of C.
GBX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GBX is likely the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
