Investors with an interest in Manufacturing - General Industrial stocks have likely encountered both Dover Corporation (DOV) and Nordson (NDSN). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Dover Corporation has a Zacks Rank of #2 (Buy), while Nordson has a Zacks Rank of #3 (Hold) right now. This means that DOV's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
DOV currently has a forward P/E ratio of 15.87, while NDSN has a forward P/E of 23.53. We also note that DOV has a PEG ratio of 1.13. 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. NDSN currently has a PEG ratio of 1.81.
Another notable valuation metric for DOV is its P/B ratio of 4.67. 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, NDSN has a P/B of 4.97.
Based on these metrics and many more, DOV holds a Value grade of B, while NDSN has a Value grade of D.
DOV sticks out from NDSN in both our Zacks Rank and Style Scores models, so value investors will likely feel that DOV is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report