RTO or SGSOY: Which Is the Better Value Stock Right Now?
In This Article:
Investors interested in stocks from the Business - Services sector have probably already heard of Rentokil Initial PLC (RTO) and SGS SA (SGSOY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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.
Rentokil Initial PLC has a Zacks Rank of #2 (Buy), while SGS SA has a Zacks Rank of #4 (Sell) right now. This means that RTO'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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
RTO currently has a forward P/E ratio of 20.55, while SGSOY has a forward P/E of 23.03. We also note that RTO has a PEG ratio of 2.81. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SGSOY currently has a PEG ratio of 2.94.
Another notable valuation metric for RTO is its P/B ratio of 3.11. 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, SGSOY has a P/B of 28.61.
These metrics, and several others, help RTO earn a Value grade of B, while SGSOY has been given a Value grade of C.
RTO has seen stronger estimate revision activity and sports more attractive valuation metrics than SGSOY, so it seems like value investors will conclude that RTO is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Rentokil Initial PLC (RTO) : Free Stock Analysis Report
SGS SA (SGSOY) : Free Stock Analysis Report