SUM Or MLM: Which Is The Better Value Stock Right Now?
Zacks Investment Research | Mar 25, 2019 09:30PM ET
Investors with an interest in Building Products - Concrete and Aggregates stocks have likely encountered both Summit Materials (SUM) and Martin Marietta (MLM). 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 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.
Summit Materials and Martin Marietta are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SUM is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
SUM currently has a forward P/E ratio of 18.47, while MLM has a forward P/E of 21.89. We also note that SUM has a PEG ratio of 1.68. 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. MLM currently has a PEG ratio of 1.70.
Another notable valuation metric for SUM is its P/B ratio of 1.29. 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, MLM has a P/B of 2.49.
Based on these metrics and many more, SUM holds a Value grade of A, while MLM has a Value grade of C.
SUM stands above MLM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SUM is the superior value option right now.
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