AYI or TT: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Technology Services sector might want to consider either Acuity (AYI) or Trane Technologies (TT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

Right now, Acuity is sporting a Zacks Rank of #2 (Buy), while Trane Technologies has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AYI has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

AYI currently has a forward P/E ratio of 18.23, while TT has a forward P/E of 31.17. We also note that AYI has a PEG ratio of 1.82. 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. TT currently has a PEG ratio of 2.09.

Another notable valuation metric for AYI is its P/B ratio of 3.78. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TT has a P/B of 12.1.

These metrics, and several others, help AYI earn a Value grade of B, while TT has been given a Value grade of D.

AYI stands above TT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AYI is the superior value option right now.

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

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