BLBD vs. FSS: Which Stock Is the Better Value Option?

Investors looking for stocks in the Automotive - Domestic sector might want to consider either Blue Bird (BLBD) or Federal Signal (FSS). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Blue Bird and Federal Signal are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BLBD likely has seen a stronger improvement to its earnings outlook than FSS has recently. However, value investors will care about much more than just this.

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.

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.

BLBD currently has a forward P/E ratio of 13.28, while FSS has a forward P/E of 24.40. We also note that BLBD has a PEG ratio of 0.81. 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. FSS currently has a PEG ratio of 1.74.

Another notable valuation metric for BLBD is its P/B ratio of 3.11. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, FSS has a P/B of 5.11.

Based on these metrics and many more, BLBD holds a Value grade of A, while FSS has a Value grade of C.

BLBD 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 BLBD is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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