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RBC vs. AOS: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Manufacturing - Electronics sector might want to consider either Regal Beloit (RBC - Free Report) or A.O. Smith (AOS - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Regal Beloit and A.O. Smith are both sporting a Zacks Rank of # 2 (Buy) right now. 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 only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

RBC currently has a forward P/E ratio of 22.03, while AOS has a forward P/E of 26.78. We also note that RBC has a PEG ratio of 2.20. 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. AOS currently has a PEG ratio of 3.35.

Another notable valuation metric for RBC is its P/B ratio of 1.52. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AOS has a P/B of 5.61.

These metrics, and several others, help RBC earn a Value grade of B, while AOS has been given a Value grade of C.

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


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A. O. Smith Corporation (AOS) - free report >>

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