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ITT vs. DHR: Which Stock Is the Better Value Option?

Zacks.com logo Zacks.com 10/20/2020

Investors with an interest in Diversified Operations stocks have likely encountered both ITT (ITT) and Danaher (DHR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both ITT and Danaher are holding a Zacks Rank of # 2 (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 just one factor that value investors are interested in.

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.

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.

ITT currently has a forward P/E ratio of 22.36, while DHR has a forward P/E of 40.82. We also note that ITT has a PEG ratio of 3.22. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DHR currently has a PEG ratio of 3.49.

Another notable valuation metric for ITT is its P/B ratio of 2.69. 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, DHR has a P/B of 4.81.

Based on these metrics and many more, ITT holds a Value grade of B, while DHR has a Value grade of D.

Both ITT and DHR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ITT is the superior value option right now.

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