AL or WAB: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Transportation - Equipment and Leasing sector have probably already heard of Air Lease (AL) and Westinghouse Air Brake Technologies (WAB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Air Lease and Westinghouse Air Brake Technologies are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AL is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

AL currently has a forward P/E ratio of 8.85, while WAB has a forward P/E of 22.90. We also note that AL has a PEG ratio of 0.51. 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. WAB currently has a PEG ratio of 1.80.

Another notable valuation metric for AL is its P/B ratio of 0.85. 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, WAB has a P/B of 3.61.

These are just a few of the metrics contributing to AL's Value grade of A and WAB's 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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Air Lease Corporation (AL): Free Stock Analysis Report

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

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