Is Recall Holdings Ltd a better bet than Brambles Limited?

What: Record management firm Recall Holdings Ltd (ASX: REC) was 2.3% higher yesterday, outperforming the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which also enjoyed a strong rally, up 1.3% just before the close of trade.

So what: The stock has been outperforming both the index and its previous parent Brambles Limited (ASX: BXB), since it was demerged in December 2013. Since the spin-off, Recall’s shares have gained 10%, while the index has increased nearly 6% and Brambles has trailed with a gain of 5%.

In fact, it’s a common theme amongst recently demerged entities with packaging group Orora Ltd (ASX: ORA) outperforming its old parent Amcor Limited (ASX: AMC) by around 15% as well.

Now what: In the past Recall has struggled to grow and many market commentators viewed Brambles’ demerger decision as primarily about casting-off the slow growth records management business from the faster-growing pooling solutions business. For investors the consideration now is whether there is better value in Recall or in Brambles.

Buy, Sell or Hold

The run up in Recall’s share price has the stock trading on approximately 16.7x FY 2015 consensus earnings. In comparison, Brambles is trading on around 19x forecast earnings. Given the seemingly greater growth potential of Brambles – on a relative basis – it looks the more enticing investment option of the two.

A value price tag + growth + big dividends!

The ASX is currently looking very pricey with not a lot of value around...but there are still pockets of value if you know where to look! Brambles and Recall might not be bargains at the moment but this stock which could turn out to be the 'story stock' of 2014 is! Get The Motley Fool's #1 pick now in our newly updated investment report. It's yours FREE. Simply click here for your copy of "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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