Investors with an interest in Transportation – Equipment and Leasing stocks have likely encountered both Air Lease (AL) and Westinghouse Air Brake $WAB Technologies (WAB). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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.
Air Lease and Westinghouse Air Brake Technologies are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that AL likely has seen a stronger improvement to its earnings outlook than WAB has recently. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
AL currently has a forward P/E ratio of 8.90, while WAB has a forward P/E of 24.84. We also note that AL has a PEG ratio of 0.51. 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. WAB currently has a PEG ratio of 1.95.
Another notable valuation metric for AL is its P/B ratio of 0.86. 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, WAB has a P/B of 3.91.
These metrics, and several others, help AL earn a Value grade of A, while WAB has been given a Value grade of D.
AL stands above WAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AL is the superior value option right now.
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