Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Legg Mason and Eaton Vance (EV Quick QuoteEV - Free Report) . 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.

Right now, both Legg Mason and Eaton Vance are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

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.

LM currently has a forward P/E ratio of 12.08, while EV has a forward P/E of 12.55. We also note that LM has a PEG ratio of 0.75. 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. EV currently has a PEG ratio of 1.64.

Another notable valuation metric for LM is its P/B ratio of 0.80. 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, EV has a P/B of 4.31.

Based on these metrics and many more, LM holds a Value grade of A, while EV has a Value grade of C.

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