GEN or TT: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Technology Services sector have probably already heard of Gen Digital (GEN) and Trane Technologies (TT). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Gen Digital has a Zacks Rank of #2 (Buy), while Trane Technologies has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GEN has an improving earnings 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.
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.
GEN currently has a forward P/E ratio of 7.79, while TT has a forward P/E of 31.13. We also note that GEN has a PEG ratio of 0.65. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. TT currently has a PEG ratio of 2.22.
Another notable valuation metric for GEN is its P/B ratio of 5.14. 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, TT has a P/B of 12.12.
Based on these metrics and many more, GEN holds a Value grade of A, while TT has a Value grade of D.
GEN has seen stronger estimate revision activity and sports more attractive valuation metrics than TT, so it seems like value investors will conclude that GEN is the superior option right now.
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This article originally published on Zacks Investment Research (zacks.com).
