SSUMY vs. HON: Which Stock Is the Better Value Option?
Investors looking for stocks in the Diversified Operations sector might want to consider either Sumitomo Corp. (SSUMY) or Honeywell $HON International Inc. (HON). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Sumitomo Corp. is sporting a Zacks Rank of #2 (Buy), while Honeywell International Inc. has a Zacks Rank of #3 (Hold). This means that SSUMY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
SSUMY currently has a forward P/E ratio of 13.39, while HON has a forward P/E of 20.22. We also note that SSUMY has a PEG ratio of 1.51. 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. HON currently has a PEG ratio of 3.04.
Another notable valuation metric for SSUMY is its P/B ratio of 1.82. 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, HON has a P/B of 9.21.
Based on these metrics and many more, SSUMY holds a Value grade of B, while HON has a Value grade of D.
SSUMY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SSUMY is likely the superior value option right now.
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