Investors looking for stocks in the Mining – Miscellaneous sector might want to consider either Billiton (BBL) or BHP (BHP). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, both Billiton and BHP are holding a Zacks Rank of # 1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BBL currently has a forward P/E ratio of 12.83, while BHP has a forward P/E of 15.51. We also note that BBL has a PEG ratio of 3.09. 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. BHP currently has a PEG ratio of 3.74.
Another notable valuation metric for BBL is its P/B ratio of 0.95. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, BHP has a P/B of 1.74.
These are just a few of the metrics contributing to BBL’s Value grade of A and BHP’s Value grade of D.
Both BBL and BHP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BBL is the superior value option right now.
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