Investors with an interest in Internet - Commerce stocks have likely encountered both eBay (EBAY) and Chewy (CHWY). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, eBay has a Zacks Rank of #2 (Buy), while Chewy 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 EBAY 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.
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.
EBAY currently has a forward P/E ratio of 14.44, while CHWY has a forward P/E of 29.97. We also note that EBAY has a PEG ratio of 1.74. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CHWY currently has a PEG ratio of 3.23.
Another notable valuation metric for EBAY is its P/B ratio of 7.19. 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, CHWY has a P/B of 42.32.
Based on these metrics and many more, EBAY holds a Value grade of B, while CHWY has a Value grade of D.
EBAY 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 EBAY is likely the superior value option right now.
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eBay Inc. (EBAY): Free Stock Analysis Report Chewy (CHWY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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