Investors with an interest in Security and Safety Services stocks have likely encountered both Brady (BRC) and Alarm.com Holdings (ALRM). 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.
Brady and Alarm.com Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that BRC’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 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.
BRC currently has a forward P/E ratio of 15.03, while ALRM has a forward P/E of 34.74. We also note that BRC has a PEG ratio of 2.15. 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. ALRM currently has a PEG ratio of 2.45.
Another notable valuation metric for BRC is its P/B ratio of 2.56. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, ALRM has a P/B of 5.80.
These are just a few of the metrics contributing to BRC’s Value grade of B and ALRM’s Value grade of D.
BRC stands above ALRM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BRC is the superior value option right now.
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