Investors interested in Financial – Investment Management stocks are likely familiar with Legg Mason (LM) and Oaktree Capital Group, LLC (OAK). 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.
Legg Mason and Oaktree Capital Group, LLC are both sporting a Zacks Rank of # 1 (Strong Buy) right now. 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. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
LM currently has a forward P/E ratio of 11.34, while OAK has a forward P/E of 14.22. We also note that LM has a PEG ratio of 0.70. 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. OAK currently has a PEG ratio of 2.22.
Another notable valuation metric for LM is its P/B ratio of 0.85. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, OAK has a P/B of 3.76.
These metrics, and several others, help LM earn a Value grade of B, while OAK has been given a Value grade of C.
Both LM and OAK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LM is the superior value option right now.
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Legg Mason, Inc. (LM) : Free Stock Analysis Report
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