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ITT vs. DHR: Which Stock Should Value Investors Buy Now?

Zacks

Investors interested in Diversified Operations stocks are likely familiar with ITT (ITT) and Danaher (DHR). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.

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.

ITT has a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ITT has an improving earnings outlook. But this is only part of the picture 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.


Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ITT currently has a forward P/E ratio of 17.17, while DHR has a forward P/E of 29.09. We also note that ITT has a PEG ratio of 1.91. 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. DHR currently has a PEG ratio of 2.68.

Another notable valuation metric for ITT is its P/B ratio of 2.90. 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 3.32.

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

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


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