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KS vs. NP: Which Stock Should Value Investors Buy Now?

Zacks

Investors with an interest in Paper and Related Products stocks have likely encountered both KapStone Paper (KS) and Neenah Paper (NP). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.

Currently, KapStone Paper has a Zacks Rank of #2 (Buy), while Neenah Paper has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that KS has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

KS currently has a forward P/E ratio of 14.02, while NP has a forward P/E of 22.24. We also note that KS has a PEG ratio of 1. 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. NP currently has a PEG ratio of 4.45.

Another notable valuation metric for KS is its P/B ratio of 2.73. 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, NP has a P/B of 4.02.

These metrics, and several others, help KS earn a Value grade of A, while NP has been given a Value grade of C.

KS sticks out from NP in both our Zacks Rank and Style Scores models, so value investors will likely feel that KS is the better option right now.


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