Investors seeking opportunities in the Security and Safety Services sector might find themselves drawn to both Brady (BRC) and Allegion (ALLE). But which of these two stocks presents the more compelling value proposition? To answer this, we need to delve deeper.
While there are various approaches to uncovering value stocks, our research indicates that pairing a strong Zacks Rank with a commendable grade in the Value category of our Style Scores system consistently generates the best returns. The proven Zacks Rank highlights companies with positive earnings estimate revisions, while our Style Scores pinpoint stocks exhibiting specific traits.
Brady and Allegion both currently sport a Zacks Rank of #2 (Buy), signifying positive earnings estimate revisions and an improving earnings outlook, which should provide investors with a sense of comfort. However, for value investors, there’s more to consider than just earnings potential.
Value investors are keenly interested in tried-and-true valuation metrics that reveal when a company is undervalued at its present share price. The Value category within our Style Scores system identifies undervalued companies by scrutinizing key metrics like the widely-used P/E ratio, P/S ratio, earnings yield, cash flow per share, and other fundamental indicators that help us establish a company’s fair value.
BRC currently boasts a forward P/E ratio of 15.97, while ALLE’s forward P/E stands at 18.53. It’s also worth noting that BRC exhibits a PEG ratio of 2.07. This widely-used metric, akin to the P/E ratio, incorporates a company’s projected EPS growth rate. In contrast, ALLE’s PEG ratio sits at 4.13. Another noteworthy valuation metric for BRC is its P/B ratio of 3.23. The P/B ratio compares a stock’s market value to its book value, calculated as total assets minus total liabilities. Comparatively, ALLE has a P/B ratio of 8.23.
These metrics, along with several others, contribute to BRC earning a Value grade of B, while ALLE receives a Value grade of C. Both BRC and ALLE are impressive stocks with robust earnings outlooks, but based on these valuation figures, we believe that BRC emerges as the superior value option at this juncture.
