Investors interested in Mining – Non Ferrous stocks are likely familiar with Amerigo Resources (ARREF) and Southern Copper (SCCO). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Amerigo Resources has a Zacks Rank of #1 (Strong Buy), while Southern Copper has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ARREF has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
ARREF currently has a forward P/E ratio of 9.83, while SCCO has a forward P/E of 18.69. We also note that ARREF has a PEG ratio of 0.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SCCO currently has a PEG ratio of 15.57.
Another notable valuation metric for ARREF is its P/B ratio of 1.65. 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, SCCO has a P/B of 7.03.
These are just a few of the metrics contributing to ARREF's Value grade of B and SCCO's Value grade of D.
ARREF is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ARREF is likely the superior value option right now.
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