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GMS vs. FAST: Which Stock Is the Better Value Option?

Zacks

Investors looking for stocks in the Building Products – Retail sector might want to consider either GMS Inc. (GMS) or Fastenal (FAST). 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.

GMS Inc. and Fastenal are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GMS has an improving earnings outlook. But this is only part of the picture for value investors.

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.


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.

GMS currently has a forward P/E ratio of 8.84, while FAST has a forward P/E of 24.39. We also note that GMS has a PEG ratio of 1.26. 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. FAST currently has a PEG ratio of 1.52.

Another notable valuation metric for GMS is its P/B ratio of 1.72. 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, FAST has a P/B of 7.67.

These metrics, and several others, help GMS earn a Value grade of B, while FAST has been given a Value grade of C.

GMS stands above FAST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GMS is the superior value option right now.


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