Investors interested in Paper and Related Products stocks are likely familiar with Veritiv (VRTV) and Klabin SA (KLBAY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Veritiv has a Zacks Rank of #2 (Buy), while Klabin SA has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that VRTV 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.
VRTV currently has a forward P/E ratio of 5.31, while KLBAY has a forward P/E of 7.15. We also note that VRTV has a PEG ratio of 0.34. 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. KLBAY currently has a PEG ratio of 1.35.
Another notable valuation metric for VRTV is its P/B ratio of 1.78. 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, KLBAY has a P/B of 2.49.
Based on these metrics and many more, VRTV holds a Value grade of A, while KLBAY has a Value grade of C.
VRTV has seen stronger estimate revision activity and sports more attractive valuation metrics than KLBAY, so it seems like value investors will conclude that VRTV is the superior option right now.
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