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NCS vs. AWI: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Updated
NantHealth, Inc. (NH) delivered earnings and revenue surprises of 23.08% and -10.83%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of NCI Building Systems (NCS) and Armstrong World Industries (AWI). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, both NCI Building Systems and Armstrong World Industries are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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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.

NCS currently has a forward P/E ratio of 10.24, while AWI has a forward P/E of 17.26. We also note that NCS has a PEG ratio of 1.02. 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. AWI currently has a PEG ratio of 1.03.

Another notable valuation metric for NCS is its P/B ratio of 3.29. 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, AWI has a P/B of 8.22.

Based on these metrics and many more, NCS holds a Value grade of B, while AWI has a Value grade of C.

Both NCS and AWI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NCS is the superior value option right now.


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NCI Building Systems, Inc. (NCS) : Free Stock Analysis Report
 
Armstrong World Industries, Inc. (AWI) : Free Stock Analysis Report
 
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Zacks Investment Research